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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number
(Exact name of registrant as specified in its charter)
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(
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class | Trading Symbol(s) | Name of each exchange on which registered | ||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ◻ | ||
Non-accelerated filer ◻ |
| Smaller reporting company |
Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes
As of August 8, 2022, the registrant had outstanding
ATN INTERNATIONAL, INC.
FORM 10-Q
Quarter Ended June 30, 2022
2
Cautionary Statement Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q (or the “Report”) contains forward-looking statements relating to, among other matters, our future financial performance and results of operations, including our expectations regarding the benefits of our acquisition of Alaska Communications; the impact of federal support program revenues; expectations regarding future revenue, operating income, EBITDA and capital expenditures; the competitive environment in our key markets, demand for our services and industry trends; our expectations regarding construction progress under our agreement as part of the FirstNet Transaction and the effect such progress will have on our financial results; expectations regarding litigation; our liquidity; and management’s plans and strategy for the future. These forward-looking statements are based on estimates, projections, beliefs, and assumptions and are not guarantees of future events or results. Actual future events and results could differ materially from the events and results indicated in these statements as a result of many factors, including, among others, (1) our ability to successfully transition our U.S. Telecom business away from wholesale wireless to other carrier and consumer-based services; (2) our ability to replace and remove all ZTE equipment in our U.S. network, as required by the FCC in a timely and cost-effective manner; (3) the general performance of our operations, including operating margins, revenues, capital expenditures, and the retention of and future growth of our subscriber base and average revenue per user; (4) our ability to realize cost synergies and expansion plans for our newly acquired Alaska Communications business; (5) our ability to satisfy the needs and demands of our major carrier customers; (6) our ability to efficiently and cost-effectively upgrade our networks and IT platforms to address rapid and significant technological changes in the telecommunications industry; (7) government funding and subsidy program availability and regulation of our businesses, which may impact our revenue, expansion plans and operating costs; (8) our reliance on a limited number of key suppliers and vendors for timely supply of equipment and services relating to our network infrastructure; (9) economic, political and other risks and opportunities facing our operations, including those resulting from the pandemic, geopolitical tensions, including the invasion of Ukraine, and from inflation, including increased costs and supply chain disruptions; (10) the loss of or an inability to recruit skilled personnel in our various jurisdictions, including key members of management; (11) our ability to find investment or acquisition or disposition opportunities that fit our strategic goals; (12) the occurrence of weather events and natural catastrophes and our ability to secure the appropriate level of insurance coverage for these assets; (13) increased competition; (14) the adequacy and expansion capabilities of our network capacity and customer service system to support our customer growth; (15) our continued access to capital and credit markets; and (16) our ability to successfully complete our pending acquisition of Sacred Wind Enterprises and recognize the expected benefits of such acquisition. These and other additional factors that may cause actual future events and results to differ materially from the events and results indicated in the forward-looking statements above are set forth more fully under Item 1A “Risk Factors” in each of our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on March 16, 2022, and the other reports we file from time to time with the SEC. We undertake no obligation and have no intention to update these forward-looking statements to reflect actual results, changes in assumptions or changes in other factors that may affect such forward-looking statements, except as required by law.
In this Report, the words “the Company,” “we,” “our,” “ours,” “us” and “ATN” refer to ATN International, Inc. and its subsidiaries. This Report contains trademarks, service marks and trade names that are the property of, or licensed by, ATN and its subsidiaries.
References to dollars ($) refer to US dollars unless otherwise specifically indicated.
3
PART I—FINANCIAL INFORMATION
Item 1. Unaudited Condensed Consolidated Financial Statements
ATN INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In Thousands, Except Share Data)
June 30, | December 31, | |||||
| 2022 |
| 2021 | |||
ASSETS | ||||||
Current Assets: | ||||||
Cash and cash equivalents | $ | | $ | | ||
Restricted cash |
| |
| | ||
Short-term investments |
| |
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Accounts receivable, net of allowances for credit losses of $ |
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Customer receivable | | | ||||
Inventory, materials and supplies |
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Prepayments and other current assets |
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Total current assets |
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Fixed Assets: | ||||||
Property, plant and equipment |
| |
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Less accumulated depreciation |
| ( |
| ( | ||
Net fixed assets |
| |
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Telecommunication licenses, net |
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Goodwill |
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Intangible assets, net |
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Operating lease right-of-use assets |
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Customer receivable - long term | | | ||||
Other assets |
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Total assets | $ | | $ | | ||
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY | ||||||
Current Liabilities: | ||||||
Current portion of long-term debt | $ | | $ | | ||
Current portion of customer receivable credit facility | | | ||||
Accounts payable and accrued liabilities |
| |
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Dividends payable |
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Accrued taxes |
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Current portion of lease liabilities | | | ||||
Advance payments and deposits |
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Total current liabilities |
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Deferred income taxes |
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Lease liabilities, excluding current portion | | | ||||
Other liabilities |
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Customer receivable credit facility, net of current portion | | | ||||
Long-term debt, excluding current portion |
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Total liabilities |
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Commitments and contingencies (Note 14) | ||||||
Redeemable noncontrolling interests: | ||||||
Preferred redeemable noncontrolling interests | | | ||||
Common redeemable noncontrolling interests | | | ||||
Total redeemable noncontrolling interests | | | ||||
ATN International, Inc. Stockholders’ Equity: | ||||||
Preferred stock, $ |
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| ||||
Common stock, $ |
| |
| | ||
Treasury stock, at cost; |
| ( |
| ( | ||
Additional paid-in capital |
| |
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Retained earnings |
| |
| | ||
Accumulated other comprehensive income |
| |
| | ||
Total ATN International, Inc. stockholders’ equity |
| |
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Noncontrolling interests |
| |
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Total equity |
| |
| | ||
Total liabilities, redeemable noncontrolling interests and equity | $ | | $ | | ||
The accompanying condensed notes are an integral part of these condensed consolidated financial statements.
4
ATN INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021
(Unaudited)
(In Thousands, Except Per Share Data)
Three months ended June 30, | Six months ended June 30, | ||||||||||||
| 2022 |
| 2021 |
| 2022 |
| 2021 |
| |||||
REVENUE: | |||||||||||||
Communication services | $ | | $ | | $ | | $ | | |||||
Construction | | | | | |||||||||
Other |
| |
| |
| |
| | |||||
Total revenue |
| |
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OPERATING EXPENSES (excluding depreciation and amortization unless otherwise indicated): | |||||||||||||
Cost of communication services and other |
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Cost of construction revenue | | | | | |||||||||
Selling, general and administrative |
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Transaction-related charges |
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Depreciation and amortization |
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Amortization of intangibles from acquisitions | | | | | |||||||||
(Gain) Loss on disposition of long-lived assets | ( | | | | |||||||||
Total operating expenses |
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Income from operations |
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OTHER INCOME (EXPENSE) | |||||||||||||
Interest income | — | | | ||||||||||
Interest expense |
| ( |
| ( |
| ( | ( | ||||||
Other income |
| ( |
| ( |
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Other income (expense), net |
| ( |
| ( |
| ( |
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INCOME BEFORE INCOME TAXES |
| ( |
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| ( |
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Income tax provision |
| ( |
| ( |
| ( |
| ( | |||||
NET INCOME (LOSS) |
| ( |
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| ( |
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Net income (loss) attributable to noncontrolling interests, net of tax expense (benefit) of $ |
| |
| ( |
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| ( | |||||
NET INCOME (LOSS) ATTRIBUTABLE TO ATN INTERNATIONAL, INC. STOCKHOLDERS | $ | ( | $ | | $ | ( | $ | | |||||
NET INCOME (LOSS) PER WEIGHTED AVERAGE SHARE ATTRIBUTABLE TO ATN INTERNATIONAL, INC. STOCKHOLDERS: | |||||||||||||
Basic | $ | ( | $ | | $ | ( | $ | | |||||
Diluted | $ | ( | $ | | $ | ( | $ | | |||||
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: | |||||||||||||
Basic |
| |
| |
| |
| | |||||
Diluted |
| |
| |
| |
| | |||||
DIVIDENDS PER SHARE APPLICABLE TO COMMON STOCK | $ | | $ | | $ | | $ | | |||||
The accompanying condensed notes are an integral part of these condensed consolidated financial statements.
5
ATN INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021
(Unaudited)
(In Thousands)
Three months ended | Six months ended | ||||||||||
2022 |
| 2021 |
| 2022 |
| 2021 | |||||
Net income (loss) | $ | ( | $ | | $ | ( | $ | | |||
Other comprehensive income (loss): | |||||||||||
Foreign currency translation adjustment |
| ( |
| ( |
| ( |
| ( | |||
Reclassification of loss on pension settlement, net of $( | | — | | — | |||||||
Unrealized gain (loss) on derivatives | ( | | ( | | |||||||
Other comprehensive income (loss), net of tax |
| ( |
| ( |
| ( |
| ( | |||
Comprehensive income (loss) |
| ( |
| |
| ( |
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Less: Comprehensive income (loss) attributable to noncontrolling interests |
| |
| ( |
| |
| ( | |||
Comprehensive income (loss) attributable to ATN International, Inc. | $ | ( | $ | | $ | ( | $ | | |||
The accompanying condensed notes are an integral part of these condensed consolidated financial statements.
6
ATN INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
FOR THE THREE MONTHS ENDED JUNE 30, 2022 AND 2021
(Unaudited)
(In Thousands, Except Per Share Data)
Total Redeemable Noncontrolling Interests | Total Equity | |||||||||||||||||||||||
Redeemable | Redeemable | Total | Treasury | Additional | Redeemable | Other | ATNI | Non- | ||||||||||||||||
Preferred | Common | Redeemable | Common | Stock, | Paid In | Retained | Common | Comprehensive | Stockholders’ | Controlling | Total | |||||||||||||
Units | Units | Noncontrolling Interests | Stock | at cost | Capital | Earnings | Units | Income/(Loss) | Equity | Interests | Equity | |||||||||||||
Balance, March 31, 2022 | $ | | $ | | $ | | $ | | $ | ( | $ | | $ | | $ | — | $ | | $ | | $ | | $ | |
Purchase of | — | — | — |
| — | ( | — | — | — | — | ( | — | ( | |||||||||||
Stock-based compensation | — | — | — |
| — | — | | — | — | — | | | | |||||||||||
Dividends declared on common stock ($ | — | — | — | — | — | — | ( | — | — | ( | ( | ( | ||||||||||||
Investments made by minority shareholders in consolidated affiliates | — | — | — |
| — | — | — | — | — | — | — | | | |||||||||||
Repurchase of noncontrolling interests | — | — | — |
| — | — | ( | — | — | — | ( | ( | ( | |||||||||||
Accrued dividend - redeemable preferred units | | — | | — | — | — | ( | — | — | ( | — | ( | ||||||||||||
Deemed dividend - redeemable common units | — | | | — | — | — | ( | | — | — | — | — | ||||||||||||
Comprehensive income: | ||||||||||||||||||||||||
Net income (loss) | — | ( | ( |
| — | — | — | ( | ( | — | ( | ( | ( | |||||||||||
Other comprehensive income | — | — | — |
| — | — | — | — | — | ( | ( | — | ( | |||||||||||
Total comprehensive income (loss) | — | ( | ( | — | — | — | ( | ( | ( |
| ( |
| ( |
| ( | |||||||||
Balance, June 30, 2022 | $ | | $ | | $ | | $ | | $ | ( | $ | | $ | | $ | — | $ | | $ | | $ | | $ | |
Balance, March 31, 2021 | $ | — | $ | — | $ | — | $ | | $ | ( | $ | | $ | | $ | — | $ | | $ | | $ | | $ | |
Purchase of | — | — | — |
| — | ( | — | — | — | — | ( | — | ( | |||||||||||
Stock-based compensation | — | — | — |
| — | — | | — | — | — | | | | |||||||||||
Dividends declared on common stock ($ | — | — | — |
| — | — | — | ( | — | — | ( | ( | ( | |||||||||||
Investments made by minority shareholders in consolidated affiliates | — | — | — | — | — | — | — | — | — | — | | | ||||||||||||
Repurchase of noncontrolling interests | — | — | — | — | — | ( | — | — | — | ( | ( | ( | ||||||||||||
Comprehensive income: | ||||||||||||||||||||||||
Net income | — | — | — |
| — | — | — | | — | — | | | | |||||||||||
Other comprehensive income (loss) | — | — | — |
| — | — | — | — | — | ( | ( | — | ( | |||||||||||
Total comprehensive income (loss) | — | — | — | — | — | — | | — | ( |
| |
| |
| | |||||||||
Balance, June 30, 2021 | $ | — | $ | — | $ | — | $ | | $ | ( | $ | | $ | | $ | — | $ | ( | $ | | $ | | $ | |
The accompanying condensed notes are an integral part of these condensed consolidated financial statements.
7
ATN INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 2022 AND 2021
Total Redeemable Noncontrolling Interests | Total Equity | |||||||||||||||||||||||
Redeemable | Redeemable | Total | Treasury | Additional | Redeemable | Other | ATNI | Non- | ||||||||||||||||
Preferred | Common | Redeemable | Common | Stock, | Paid In | Retained | Common | Comprehensive | Stockholders’ | Controlling | Total | |||||||||||||
Units | Units | Noncontrolling Interests | Stock | at cost | Capital | Earnings | Units | Income/(Loss) | Equity | Interests | Equity | |||||||||||||
Balance, December 31, 2021 | $ | | $ | | $ | | $ | | $ | ( | $ | | $ | | $ | — | $ | | $ | | $ | | $ | |
Purchase of | — | — | — |
| — | ( | — | — | — | — | ( | — | ( | |||||||||||
Stock-based compensation | — | — | — |
| — | — | | — | — | — | | | | |||||||||||
Dividends declared on common stock ($ | — | — | — |
| — | — | — | ( | — | — | ( | ( | ( | |||||||||||
Investments made by minority shareholders in consolidated affiliates | — | — | — |
| — | — | — | — | — | — | — | | | |||||||||||
Repurchase of noncontrolling interests | — | — | — | — | — | ( | — | — | — | ( | ( | ( | ||||||||||||
Accrued dividend - redeemable preferred units | | — | | — | — | — | ( | — | — | ( | — | ( | ||||||||||||
Deemed dividend - redeemable common units | | | — | — | — | ( | | — | — | — | — | |||||||||||||
Comprehensive income: | ||||||||||||||||||||||||
Net income (loss) | — | ( | ( |
| — | — | — | ( | ( | — | ( | ( | ( | |||||||||||
Other comprehensive income (loss) | — | — | — |
| — | — | — | — | — | ( | ( | — | ( | |||||||||||
Total comprehensive income | — | ( | ( | — | — | — | ( | ( | ( |
| ( |
| ( |
| ( | |||||||||
Balance, June 30, 2022 | $ | | $ | | $ | | $ | | $ | ( | $ | | $ | | $ | — | $ | | $ | | $ | | $ | |
Balance, December 31, 2020 | $ | — | $ | — | $ | — | $ | | $ | ( | $ | | $ | | $ | — | $ | | $ | | $ | | $ | |
Purchase of | — | — | — |
| — | ( | — | — | — | — | ( | — | ( | |||||||||||
Stock-based compensation | — | — | — |
| — | — | | — | — | — | | | | |||||||||||
Investments made by minority shareholders | — | — | — | — | — | — | — | — | — | — | | | ||||||||||||
Dividends declared on common stock ($ | — | — | — |
| — | — | — | ( | — | — | ( | ( | ( | |||||||||||
Repurchase of noncontrolling interests | — | — | — | — | — | ( | — | — | — | ( | ( | ( | ||||||||||||
Comprehensive income: | ||||||||||||||||||||||||
Net income | — | — | — |
| — | — | — | | — | — | | | | |||||||||||
Other comprehensive income | — | — | — |
| — | — | — | — | — | ( | ( | — | ( | |||||||||||
Total comprehensive income | — | — | — | — | — | — | | — | ( |
| |
| |
| | |||||||||
Balance, June 30, 2021 | $ | — | $ | — | $ | — | $ | | $ | ( | $ | | $ | | $ | — | $ | ( | $ | | $ | | $ | |
8
ATN INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR SIX MONTHS ENDED JUNE 30, 2022 AND 2021
(In Thousands)
Six Months Ended June 30, | |||||
2022 |
| 2021 | |||
Cash flows from operating activities: | |||||
Net income | $ | ( | $ | | |
Adjustments to reconcile net income to net cash flows provided by operating activities: | |||||
Depreciation | |
| | ||
Amortization of acquisition intangibles | | | |||
Provision for doubtful accounts | |
| | ||
Amortization of debt discount and debt issuance costs | |
| | ||
Loss on disposition of long-lived assets | | | |||
Stock-based compensation | |
| | ||
Deferred income taxes | ( |
| ( | ||
Gain on equity investments | ( | ( | |||
Loss on pension settlement | | — | |||
Unrealized gain on foreign currency | — | ( | |||
Changes in operating assets and liabilities, excluding the effects of acquisitions and dispositions: | |||||
Accounts receivable | ( |
| | ||
Customer receivable | ( | ( | |||
Prepaid income taxes | |
| — | ||
Accrued taxes | |
| ( | ||
Materials and supplies, prepayments, and other current assets | ( |
| ( | ||
Accounts payable and accrued liabilities, advance payments and deposits and other current liabilities | ( |
| ( | ||
Other assets | ( | | |||
Other liabilities | ( |
| | ||
Net cash provided by operating activities |
| |
| | |
Cash flows from investing activities: | |||||
Capital expenditures |
| ( |
| ( | |
Reimbursable capital expenditures | ( | ( | |||
Purchases of strategic investments | ( | ( | |||
Receipt of capital government grants | — | | |||
Sale of businesses, net of transferred cash of $ | | | |||
Net cash used in investing activities |
| ( |
| ( | |
Cash flows from financing activities: | |||||
Dividends paid on common stock |
| ( |
| ( | |
Distributions to noncontrolling interests |
| ( |
| ( | |
Finance lease payment | ( | — | |||
Term loan - repayments |
| ( |
| ( | |
Revolving credit facility – borrowings | | — | |||
Revolving credit facility – repayments | ( | — | |||
Proceeds from customer receivable credit facility |
| |
| | |
Repayment of customer receivable credit facility | ( | ( | |||
Purchases of common stock – stock- based compensation | ( | ( | |||
Purchases of common stock – share repurchase plan | ( | ( | |||
Investments made by minority shareholders in consolidated affiliates | | — | |||
Repurchases of noncontrolling interests | ( | ( | |||
Net cash provided by (used in) financing activities |
| |
| ( | |
Net change in cash, cash equivalents, and restricted cash |
| ( |
| ( | |
Total cash, cash equivalents, and restricted cash, beginning of period |
| |
| | |
Total cash, cash equivalents, and restricted cash, end of period | $ | | $ | | |
Purchases of property, plant and equipment included in accounts payable and accrued expenses | $ | | $ | | |
The accompanying condensed notes are an integral part of these condensed consolidated financial statements.
9
ATN INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1.ORGANIZATION AND BUSINESS OPERATIONS
The Company is a provider of digital infrastructure and communications services in the United States and internationally, including the Caribbean region, with a focus on rural and remote markets with a growing demand for infrastructure investments. The Company’s operating subsidiaries today primarily provide: (i) advanced wireless and wireline connectivity to residential, business and government customers, including a range of high-speed Internet and data services, fixed and mobile wireless solutions, and video and voice services; and (ii) carrier and enterprise communications services, such as terrestrial and submarine fiber optic transport, and communications tower facilities.
At the holding company level, the Company oversees the allocation of capital within and among its subsidiaries, affiliates, new investments, and stockholders. The Company also has developed significant operational expertise and resources that it uses to augment the capabilities of its individual operating subsidiaries in its local markets. Over the past 10 years, the Company has built a platform of resources and expertise to support its operating subsidiaries and to improve their quality of service with greater economies of scale and expertise than would typically be available at the operating subsidiary level. The Company also provides management, technical, financial, regulatory, and marketing services to its operating subsidiaries and typically receives a management fee calculated as a percentage of their revenues, which is eliminated in consolidation. The Company also actively evaluates potential acquisitions, investment opportunities and other strategic transactions, both domestic and international, and generally looks for those that it believes fit the Company’s profile of telecommunications businesses and have the potential to complement its “Glass and Steel” and “fiber first” approach in markets while generating steady excess cash flows over extended periods of time. The Company uses the cash generated from its operations to re-invest in organic growth in its existing businesses, to make strategic investments in additional businesses, and to return cash to its investors through dividends or stock repurchases.
As of June 30, 2022, the Company offered the following types of services to its customers:
| ● | Mobility Telecommunications Services. The Company offers mobile communications services and equipment over its wireless networks to both its business and consumer subscribers. |
| ● | Fixed Telecommunications Services. The Company provides fixed data and voice telecommunications services to both its business and consumer subscribers in all of its markets. These services include consumer broadband and high speed data solutions for businesses. For some markets, fixed services also include video services and revenue derived from support under certain government programs. |
| ● | Carrier Telecommunication Services. The Company delivers services to other telecommunications providers such as wholesale roaming, the leasing of critical network infrastructure such as tower and transport facilities, site maintenance and international long-distance services. |
| ● | Managed Services. The Company provides information technology services such as network, application, infrastructure and hosting services to both its business and consumer customers to complement its fixed services in its existing markets. |
Through June 30, 2022, the Company has identified
| ● | International Telecom. In the Company’s international markets, it offers fixed services, mobility services, carrier services and managed services to customers in Bermuda, the Cayman Islands, Guyana and the US Virgin Islands. |
| ● | US Telecom. In the United States, the Company offers fixed services, carrier services, and managed services to business and consumer customers in Alaska and the western United States. In the western |
10
| United States, the Company also provides mobility services to enterprise and consumer customers. |
| ● | Renewable Energy. In India, the Company provided distributed generation solar power to commercial and industrial customers through January 27, 2021. See Disposition of International Solar Business for further details. |
The following chart summarizes the operating activities of the Company’s principal subsidiaries, the segments in which it reports its revenue and the markets it served during the three months ended June 30, 2022:
Segment |
| Services |
| Markets |
| Tradenames |
International Telecom |
| Mobility Services |
| Bermuda, Guyana, US Virgin Islands |
| One, GTT+, Viya |
Fixed Services |
| Bermuda, Cayman Islands, Guyana, US Virgin Islands |
| One, Logic, GTT, Viya | ||
Carrier Services | Bermuda, Guyana, US Virgin Islands | One, GTT+, Viya | ||||
Managed Services | Bermuda, Cayman Islands, US Virgin Islands, Guyana | Fireminds, One, Logic, GTT, Viya | ||||
US Telecom |
| Mobility Services |
| United States (rural markets) |
| Choice, Choice NTUA Wireless, Geoverse |
Fixed Services | United States |
| Alaska Communications, Commnet, Choice, Choice NTUA Wireless | |||
Carrier Services | United States | Alaska Communications, Commnet, Essextel | ||||
| Managed Services |
| United States |
| Alaska Communications, Choice | |
Renewable Energy (1) | Solar | India | Vibrant Energy |
| (1) | See Disposition of International Solar Business for further details. |
For further information about the Company’s financial segments and geographical information about its operating revenues and assets, see Note 13 to the Unaudited Condensed Consolidated Financial Statements included in this Report.
COVID-19
The Company continues to monitor and assess the effects of the ongoing COVID-19 pandemic on its commercial operations, the safety of its employees and their families, its sales force and customers.
The preparation of the condensed consolidated financial statements requires the Company to make estimates, judgments and assumptions, which are evaluated on an ongoing basis, which may affect the reported amounts of assets, liabilities, equity, revenues and expenses and related disclosure of contingent assets and liabilities. The Company assessed certain accounting matters and estimates that generally require consideration of forecasted financial information in context with the information and estimates reasonably available to the Company and the unknown future impacts of COVID-19 as of June 30, 2022 and through the date of this report. The accounting matters assessed included, but were not limited to, the allowance for credit losses, the carrying value of goodwill and other long-lived assets, financial assets, valuation allowances for tax assets and revenue recognition.
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The Company’s assessment of the impact of COVID-19 on its operations did not indicate that there was a material adverse impact to its consolidated financial statements as of and for the three and six months ended June 30, 2022. However, future assessments of the impacts of COVID-19, as well as other factors, including the possible reinstatement of certain COVID-19 travel-related and stay-at-home restrictions, could result in material adverse impacts to its consolidated financial statements in future reporting periods. For example, the Company may experience difficulty in procuring network or retail equipment, such as handsets for subscribers, as a result of COVID-19 restrictions and related supply chain challenges. In addition, there is increased uncertainty related to predicting subscribers’ procurement behavior for services.
2. BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The financial information included herein is unaudited; however, the Company believes such information and the disclosures herein are adequate to make the information presented not misleading and reflect all adjustments (consisting only of normal recurring adjustments) that are necessary for a fair statement of the Company’s financial position and results of operations for the periods described therein. The year-end condensed balance sheet data was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America. Results of interim periods may not be indicative of results for the full year. These condensed consolidated financial statements and related notes should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on March 16, 2022.
The condensed consolidated financial statements include the accounts of the Company, its subsidiaries in which the Company holds controlling interests and certain entities which are consolidated in accordance with the provisions of the Financial Accounting Standards Board’s (“FASB”) authoritative guidance on the consolidation of variable interest entities, since it is determined that the Company is the primary beneficiary of these entities.
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Presentation of Revenue
Effective October 1, 2021, the Company’s statement of operations separately reflects Construction revenue. All periods presented have been adjusted to conform to these presentation updates.
Presentation of Operating Expenses
Effective January 1, 2021, the Company changed its presentation of operating expenses in the Condensed Consolidated Statements of Operations by combining the previously disclosed Termination and Access Fees with Engineering and Operations as the newly represented Costs of Communication Services and Other. In addition, the previously disclosed Sales, Marketing and Customer Service expenses are now combined with the previously disclosed General and Administrative expenses within the newly represented Selling, General and Administrative expenses. The change in presentation was made to better align the Company’s results with industry standards. Cost of construction services continues to be broken out separately and all depreciation and amortization continues to be shown separately.
Recent Accounting Pronouncements
In October 2021, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires entities to apply Topic 606 to recognize and measure contract assets and contract liabilities in a business combination. ASU 2021-08 is effective for fiscal years beginning after December 15, 2022, with early adoption permitted. The Company prospectively adopted this accounting standard in 2021. The adoption of ASC 2021-08 will result in the recognition of larger deferred revenue balances in future acquisitions.
In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance, which required entities to make specific annual disclosures about transactions with a government. The new standard is effective for fiscal years beginning after December 15, 2021. The adoption of ASU 2021-10 did not have a material impact on the Company’s disclosures. Going forward the Company will evaluate the disclosure requirements based on its participation in government programs.
3. REVENUE RECOGNITION AND RECEIVABLES
Revenue Accounted for in Accordance with Other Guidance
The Company records revenue in accordance with ASC 606 from contracts with customers and ASC 842 from lease agreements, as well as government grants. Lease revenue recognized under ASC 842 is disclosed in Note 4 and government grant revenue is disclosed in Note 9.
Timing of Revenue Recognition
Revenue accounted for in accordance with ASC 606 consisted of the following for the periods presented below.
Three months ended | Six months ended | ||||||||||
June 30, 2022 | June 30, 2021 | June 30, 2022 | June 30, 2021 | ||||||||
Services transferred over time | $ | | $ | | $ | | $ | | |||
Goods and services transferred at a point in time | | | | | |||||||
Total revenue accounted for under ASC 606 | | | | | |||||||
Contract Assets and Liabilities
The Company recognizes contract assets and liabilities on its balance sheet. Contract assets represent unbilled amounts typically resulting from consumer Mobility contracts with both a multiyear service period and a promotional discount. In these contracts, the revenue recognized exceeds the amount billed to the customer. The current portion of
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the contract asset is recorded in prepayments and other current assets and the noncurrent portion is included in other assets on the Company’s balance sheets.
Contract liabilities consist of advance payments and billings in excess of revenue recognized. Mobility and Fixed revenue for postpaid customers is generally billed
In July 2019, the Company entered into a Network Build and Maintenance Agreement with ATT Mobility, LLC (“ATT”) and subsequently entered into amendments in August 2020, May 2021 and August 2022 (the “FirstNet Agreement”). In connection with the FirstNet Agreement, the Company is building a portion of ATT’s network for the First Responder Network Authority in or near the Company’s current operating areas in the western United States (the “FirstNet Transaction”). The FirstNet Transaction includes construction and service performance obligations. The Company allocated the transaction price of the FirstNet Agreement to each performance obligation based on the relative standalone selling price of each performance obligation in the contract. The standalone selling price is the estimated price the Company would charge for the good or service in a separate transaction with similar customers in similar circumstances. The current portion of receivables under this agreement is recorded in customer receivable and the long-term portion is recorded in customer receivable long-term on the Company’s balance sheet.
The Company has certain Carrier Services roaming agreements that contain stand-ready performance obligations and management allocates transaction value to performance obligations based on the standalone selling price. The standalone selling price is the estimated price the Company would charge for the good or service with similar customers in similar circumstances. Management determined the performance obligations were obligations to make the service continuously available and will recognize revenue evenly over the service period.
Contract assets and liabilities consisted of the following (amounts in thousands)
June 30, 2022 | December 31, 2021 | $ Change | % Change | ||||||||
Contract asset – current | $ | | $ | | $ | ( | ( | % | |||
Contract asset – noncurrent | | | | | % | ||||||
Contract liability – current | ( | ( | | | % | ||||||
Contract liability – noncurrent | ( | ( | | | % | ||||||
Net contract liability | $ | ( | $ | ( | $ | | | % | |||
The contract asset – current is included in prepayments and other current assets and the contract asset – noncurrent is included in other assets on the Company’s balance sheet. The contract liability – current is included in advance payments and deposits and the contract liability – noncurrent is included in other liabilities on the Company’s balance sheet. The decrease in the Company’s net contract liability was due to the timing of customer prepayments, contract billings, and recognition of deferred revenue. During the six months ended June 30, 2022, the Company recognized revenue of $
Contract Acquisition Costs
The June 30, 2022 balance sheet includes contract acquisition costs of $
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Remaining Performance Obligations
Remaining performance obligations represent the transaction price allocated to unsatisfied performance obligations of certain multiyear Mobility contracts, which include a promotional discount, Managed Services contracts, and the Company’s Carrier Services construction and service contracts. The transaction price allocated to unsatisfied performance obligations was $
The Company has certain Mobility, Fixed, and Carrier Services contracts where the transaction price is allocated to remaining performance obligations. However, the Company omits these contracts from its disclosure by applying the
Disaggregation
The Company's revenue is presented on a disaggregated basis in Note 13 based on an evaluation of disclosures outside the financial statements, information regularly reviewed by the chief operating decision makers for evaluating the financial performance of operating segments and other information that is used for performance evaluation and resource allocations. This includes revenue from Communication Services, Construction, and Other revenue. Communication Services revenue is further disaggregated into business and consumer Mobility, business and consumer Fixed, Carrier Services, and Other services. Other revenue is further disaggregated into Renewable Energy and Managed Services revenue. This disaggregation of revenue depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.
Receivables
The Company records an estimate of future credit losses in conjunction with the revenue transaction based on the information available including historical experience and management’s expectations of future conditions. Those estimates will be updated as additional information becomes available. The Company’s allowance for uncollectible accounts receivable is based on management’s assessment of the collectability of assets pooled together with similar risk characteristics.
At June 30, 2022, the Company had gross accounts receivable of $
| Six months ended June 30, 2022 | Six months ended June 30, 2021 | ||||
Balance at beginning of period |
| $ | | $ | | |
Current period provision for expected losses |
| | | |||
Write-offs charged against the allowance |
| ( | ( | |||
Recoveries collected | | | ||||
Balance at end of period | $ | | $ | | ||
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4. LEASES
Lessee Disclosure
The Company has operating and financing leases for towers, land, corporate offices, retail facilities, and data transport capacity. The are generally between and
Supplemental lease information
The components of lease expense were as follows (in thousands):
Three months ended | Six months ended | ||||||||||
June 30, 2022 | June 30, 2021 | June 30, 2022 | June 30, 2021 | ||||||||
Operating lease cost: | |||||||||||
Operating lease cost | $ | | $ | | $ | | $ | | |||
Short-term lease cost | | | | | |||||||
Variable lease cost | | | | | |||||||
Total operating lease cost | $ | | $ | | $ | | $ | | |||
Finance lease cost: | |||||||||||
Amortization of right-of-use asset | $ | | $ | | $ | | $ | | |||
Variable costs | | | | | |||||||
Interest costs | | — | | — | |||||||
Total finance lease cost | $ | | $ | | $ | | $ | | |||
During the six month periods ended June 30, 2022 and 2021, the Company paid $
At June 30, 2022, finance leases with a cost of $
During the six months ended June 30, 2021, the Company recorded $
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The weighted average remaining lease terms and discount rates as of June 30, 2022 and December 31, 2021 are noted in the table below:
June 30, 2022 | December 31, 2021 | ||||
Weighted-average remaining lease term | |||||
Operating leases | |||||
Financing leases | |||||
Weighted-average discount rate | |||||
Operating leases | |||||
Financing leases | |||||
Maturities of lease liabilities as of June 30, 2022 were as follows (in thousands):
Operating Leases | Financing Leases | ||||
2022 (excluding the six months ended June 30, 2022) | $ | | $ | | |
2023 | | | |||
2024 | | | |||
2025 | | | |||
2026 | | | |||
Thereafter | | | |||
Total lease payments | | | |||
Less imputed interest | ( | ( | |||
$ | | $ | | ||
Maturities of lease liabilities as of December 31, 2021 were as follows (in thousands):
Operating Leases | Financing Leases | ||||
2022 | $ | | $ | | |
2023 | | | |||
2024 | | | |||
2025 | | | |||
2026 | | | |||
Thereafter | | | |||
Total lease payments | | | |||
Less imputed interest | ( | ( | |||
$ | | $ | | ||
As of June 30, 2022, the Company did not have any material operating or finance leases that have not yet commenced.
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Lessor Disclosure
The Company is the lessor in agreements to lease the use of its network assets including its cell sites and buildings. For the three and six months ended June 30, 2022 the Company recorded $
The following table presents the maturities of future undiscounted lease payments for the periods indicated:
2022 (excluding the six months ended June 30, 2022) | $ | |
2023 | | |
2024 | | |
2025 | | |
2026 | | |
Thereafter | | |
Total future lease payments | $ | |
5. USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. The most significant estimates relate to the allowance for credit losses, useful lives of the Company’s fixed and finite-lived intangible assets, allocation of purchase price to assets acquired and liabilities assumed in business combinations, fair value of indefinite-lived intangible assets, goodwill, assessing the impairment of assets, revenue, and income taxes. Actual results could differ significantly from those estimates. See Note 1 to the Unaudited Condensed Consolidated Financial Statements included in this Report for a discussion of the impact of COVID-19 on the use of these estimates.
6. ACQUISITIONS AND DISPOSITIONS
US Telecom
Pending Acquisition of Sacred Wind Enterprises
On July 26, 2022, the Company, via its newly formed wholly owned subsidiary Alloy, Inc. (“Alloy”), entered into a stock purchase agreement (the “Purchase Agreement”) to acquire all of the issued and outstanding stock of Sacred Wind Enterprises, Inc. (“Sacred Wind”), a rural telecommunications provider in New Mexico. Under the Purchase Agreement, the Company will contribute all of its ownership interests in its Commnet Wireless business to Alloy, and issue Alloy equity to the Sacred Wind stockholders representing the combined ownership of Sacred Wind and Commnet. The acquisition is subject to certain closing conditions, including the receipt of required third party and regulatory approvals such as approval of the Federal Communications Commission . Under the Purchase Agreement, Sacred Wind will keep in place its approximately $
The Company believes that the acquisition of Sacred Wind will expand the Company’s infrastructure reach and broadband services in the rural Southwest and increase its wholesale carrier, residential and business broadband services.
The acquisition of Sacred Wind is expected to close subject to Federal Communications Commission and other required approvals in the fourth quarter of 2022 or first quarter of 2023.
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Completed Acquisition of Alaska Communications
On July 22, 2021 (“Closing Date”), the Company completed the acquisition of Alaska Communications Systems Group, Inc. (“Alaska Communications”) pursuant to the terms of the Merger Agreement whereby Alaska Communications became a consolidated subsidiary of the Company (the “Alaska Transaction”). At completion of the acquisition, each Alaska Communications common share was converted into the right to receive $
The Company funded the acquisition with cash on hand, debt, and a contribution from the Freedom 3 Investors. The Company borrowed, through multiple financing transactions, a net of $
The fair value of the common units remained at $
As a result of the Alaska Transaction, the Company owns
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The table below represents the allocation of the total consideration transferred to the acquired assets and assumed liabilities based on management’s estimate of their acquisition date fair values (amounts in thousands):
Consideration Transferred | $ | |
Noncontrolling interests | | |
Total value to allocate | | |
Purchase price allocation: | ||
Cash and cash equivalents | | |
Restricted cash | | |
Short-term investments | | |
Accounts receivable | | |
Inventory, materials and supplies | | |
Prepayments and other current assets | | |
Fixed assets | | |
Telecommunication licenses | | |
Intangible assets | | |
Operating lease right-of-use assets | | |
Other assets | | |
Accounts payable and accrued liabilities | ( | |
Accrued taxes | ( | |
Advance payments and deposits | ( | |
Current portion of lease liabilities | ( | |
Deferred income taxes | ( | |
Lease liabilities, excluding current portion | ( | |
Other liabilities | ( | |
Net assets acquired | $ | |
The acquired fixed assets are comprised of telecommunication equipment located in Alaska and the western United States. The fixed assets were valued using the income and cost approaches. Cash flows were discounted between
The Company’s statement of operations for the three months ended June 30, 2022 includes $
The following table reflects unaudited pro forma operating results of the Company for the three and six months ended June 30, 2021 assuming the transaction occurred on January 1, 2020. The unaudited pro forma amounts adjust Alaska Communications’ results to reflect the depreciation and amortization that would have been recorded assuming the fair value adjustments to fixed assets and intangible assets had been applied from January 1, 2020. Additionally, all
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transaction costs associated with the Alaska Transaction were recorded on January 1, 2020 in the unaudited pro forma results. Lastly, the unaudited pro forma results were adjusted to reflect changes to the acquired entities’ financial structure related to the transaction. Specifically, the pre-closing debt of $
Three months ended | Six months ended | ||||||||||
June 30, 2021 | June 30, 2021 | ||||||||||
As Reported | Pro Forma | As Reported | Pro Forma | ||||||||
Revenue | $ | | $ | | $ | | $ | | |||
Net Income (loss) attributable to ATN International, Inc. Stockholders | $ | | $ | ( | $ | | $ | | |||
Earnings (loss) Per Share | |||||||||||
Basic | $ | | $ | ( | $ | | $ | ( | |||
Diluted | $ | | $ | ( | $ | | $ | ( | |||
The unaudited pro forma adjustments decreased net income attributable to ATN International, Inc. Stockholders by $
The unaudited pro forma data is presented for illustrative purposes only and is not necessarily indicative of the operating results that would have occurred if the acquisitions had been consummated on these dates or of future operating results of the combined company following this transaction.
Renewable Energy
Disposition of International Solar Business
In January 2021, the Company completed the sale of
21
The table below identifies the assets and liabilities transferred (in thousands):
Consideration Received | $ | |
Assets and liabilities disposed | ||
Current assets | | |
Property, plant and equipment | | |
Other assets | | |
Current liabilities | ( | |
Net assets disposed | $ | |
Consideration less net assets disposed | ( | |
Foreign currency losses reclassified from accumulated other comprehensive income | ( | |
Loss on sale | ( | |
Transaction costs | ( | |
Loss on sale including transaction costs | $ | ( |
The Company reported a loss on sale of $
The Vibrant Transaction does not qualify as discontinued operations because the disposition was not a strategic shift which will have a major effect on the Company’s operations, and as a result, the historical results and financial position of the operations are presented within continuing operations.
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7. FAIR VALUE MEASUREMENTS AND INVESTMENTS
In accordance with the provisions of fair value accounting, a fair value measurement assumes that a transaction to sell an asset or transfer a liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability, and defines fair value based upon an exit price model.
The fair value measurement guidance establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The guidance describes three levels of inputs that may be used to measure fair value:
Level 1 | Quoted prices in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset and liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 1 assets and liabilities include money market funds, debt and equity securities and derivative contracts that are traded in an active exchange market. | |
Level 2 | Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 2 assets and liabilities include debt securities with quoted prices that are traded less frequently than exchange-traded instruments and derivative contracts whose value is determined using a pricing model with inputs that are observable in the market or can be derived principally from or corroborated by observable market data. This category generally includes corporate obligations and non-exchange traded derivative contracts. | |
Level 3 | Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments and intangible assets that have been impaired whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. |
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Assets and liabilities of the Company measured at fair value on a recurring basis as of June 30, 2022 and December 31, 2021 are summarized as follows (in thousands):
June 30, 2022 | ||||||||||||
Significant Other | ||||||||||||
Quoted Prices in | Observable | Unobservable | ||||||||||
Active Markets | Inputs | Inputs | ||||||||||
Description | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||
Money market funds | $ | | $ | — | $ | — | $ | | ||||
Short term investments | | — | — | | ||||||||
Other investments | — | — | | | ||||||||
Alaska Communications redeemable common units | — | — | ( | ( | ||||||||
Warrants on Alaska Communications redeemable common units | — | — | ( | ( | ||||||||
Total assets and liabilities measured at fair value | $ | | $ | — | $ | ( | $ | ( | ||||
December 31, 2021 | ||||||||||||
| Significant Other | |||||||||||
Quoted Prices in | Observable | Unobservable | ||||||||||
Active Markets | Inputs | Inputs | ||||||||||
Description | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||
Money market funds | $ | | $ | — | $ | — | $ | | ||||
Short term investments | | — | — | | ||||||||
Other investments | — | — | | | ||||||||
Alaska Communications redeemable common units | — | — | ( | ( | ||||||||
Warrants on Alaska Communications redeemable common units | — | — | ( | ( | ||||||||
Interest rate swap | — | ( | — | ( | ||||||||
Total assets and liabilities measured at fair value | $ | | $ | ( | $ | ( | $ | ( | ||||
During the six months ended June 30, 2022, the fair value of the remaining Level 3 investments increased $
Certificate of Deposit
As of June 30, 2022 and December 31, 2021 this asset class consisted of a time deposit at a financial institution denominated in US dollars. The asset class is classified within Level 2 of the fair value hierarchy because the fair value was based on observable market data.
Money Market Funds
As of June 30, 2022 and December 31, 2021, this asset class consisted of a money market portfolio that comprises Federal government and US Treasury securities. The asset class is classified within Level 1 of the fair value hierarchy because its underlying investments are valued using quoted market prices in active markets for identical assets.
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Other Investments
The Company holds investments in equity securities consisting of noncontrolling investments in privately held companies. The investments are accounted for using equity method accounting, the measurement alternative for investments without a readily determinable fair value, or fair value. In the first quarter of 2021, the Company began to account for its former India solar operations under the equity method of accounting. The fair value investments are valued using level 3 inputs and the Company used the income approach to fair value the investment. The inputs consisted of a discount rate and future cash flows calculated based on the investment attributes. A roll forward of the investments is below:
Investments without a readily determinable fair value | Fair value investments | Equity investments | Total | |||||||||
Balance, December 31, 2021 | $ | | $ | | $ | | $ | | ||||
Income recognized | — | | ( | ( | ||||||||
Contributions / (distributions) | — | ( | | | ||||||||
Foreign currency loss | — | — | ( | ( | ||||||||
Gain recognized | | — | — | | ||||||||
Balance, June 30, 2022 | $ | | $ | | $ | | $ | | ||||
These investments are included with other assets on the consolidated balance sheets.
Redeemable Common Units and Warrants
The Company issued redeemable common units, and warrants to purchase additional common units, in a subsidiary of the Company in conjunction with its acquisition of Alaska Communications (Refer to Note 6). The instruments are redeemable at the option of the holder. Both the common units and warrants to purchase common units are recorded at fair value in the Company’s financial statements. The common units are recorded in redeemable noncontrolling interest and the warrants are recorded in other liabilities on the Company’s balance sheets. The Company calculates the fair value of the instruments using a market approach with Level 3 inputs.
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Other Fair Value Disclosures
The carrying amounts of cash and cash equivalents, accounts receivable, and accounts payable and accrued expenses approximate their fair values because of the relatively short-term maturities of these financial instruments. The fair value of the interest rate swap is measured using Level 2 inputs.
The fair value of long-term debt is estimated using Level 2 inputs. At June 30, 2022, the fair value of long-term debt, including the current portion, was $
8. LONG-TERM DEBT
On April 10, 2019, the Company entered into a credit facility, with CoBank, ACB and a syndicate of other lenders (the “2019 CoBank Credit Facility”). The 2019 CoBank Credit Facility provides for a $
Amounts borrowed under the 2019 CoBank Credit Facility bear interest at a rate equal to, at the Company’s option, either (i) the London Interbank Offered Rate (“LIBOR”) plus an applicable margin ranging between
The 2019 CoBank Credit Facility contains customary representations, warranties and covenants, including a financial covenant that imposes a maximum ratio of indebtedness to EBITDA as well as covenants limiting additional indebtedness, liens, guaranties, mergers and consolidations, substantial asset sales, investments and loans, sale and leasebacks, transactions with affiliates and fundamental changes. The Company’s investments in “unrestricted” subsidiaries and certain dividend payments to its stockholders are not limited unless the Total Net Leverage Ratio is equal to or greater than
The 2019 CoBank Credit Facility also provides for the incurrence by the Company of incremental term loan facilities, when combined with increases to revolving loan commitments, in an aggregate amount not to exceed $
As of June 30, 2022, the Company was in compliance with all of the financial covenants, had $
Alaska Credit Facility
On July 22, 2021, Alaska Communications entered into a Credit Agreement (the “Alaska Credit Facility”) with Fifth Third Bank, National Association, as Administrative Agent, and a syndicate of lenders to provide a $
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The Company capitalized $
The Alaska Credit Facility also provides for incremental term loans up to an aggregate principal amount of the greater of $
The key terms and conditions of the Alaska Credit Facility include the following:
| ● | Amounts outstanding bear an interest rate of LIBOR, or a LIBOR replacement rate as applicable, plus a margin ranging from |
| ● | Principal repayments are due |
| ● | Alaska Communications is required to maintain financial ratios subsequent to the closing of the Alaska Transaction, as defined in the Alaska Credit Facility, including (a) a maximum Consolidated Net Total Leverage Ratio of |
| ● | The Alaska Credit Facility is non-recourse to the Company and is secured by substantially all of the personal property and certain material real property owned by Alaska Communications. |
Alaska Communication’s interest rate swap, which had been designated as a cash flow hedge with an interest rate of
FirstNet Receivables Credit Facility
On March 26, 2020, Commnet Finance, a wholly owned subsidiary of Commnet Wireless, entered into a receivables credit facility with the Company, Commnet Wireless, and CoBank, ACB (the “Receivables Credit Facility”).
The Receivables Credit Facility provides for a senior secured delayed draw term loan in an aggregate principal amount of up to $
The maturity date for each loan will be set by CoBank and will match the weighted average maturity of the certain receivables financed.
Interest on the loans accrues at a fixed annual interest rate to be quoted by CoBank.
The Receivables Credit Facility contains customary events of termination, representations and warranties, affirmative and negative covenants and events of default customary for facilities of this type.
As of June 30, 2022, the Company had $
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Viya Debt
The Company, and certain of its subsidiaries, have entered into a $
The Company paid a fee of $
As of June 30, 2022, $
On May 5, 2022, RTFC agreed to amend the Net Leverage Ratio to
One Communications Debt
The Company has an outstanding loan from HSBC Bank Bermuda Limited (the “One Communications Debt”) which is scheduled to mature on August 31, 2022 and bears interest at the one-month LIBOR plus a margin ranging between
The One Communications Debt contains customary representations, warranties and affirmative and negative covenants (including limitations on additional debt, guaranties, sale of assets and liens) and financial covenants, tested annually as of and for the twelve months ended December 31st, that limit the ratio of tangible net worth to long term debt and total net debt to EBITDA and require a minimum debt service coverage ratio (as defined in the One Communications Debt agreement).
As of June 30, 2022, $
9. GOVERNMENT SUPPORT AND SPECTRUM MATTERS
Universal Service Fund and Connect America Fund Phase II Programs
The Company recognizes revenue from several government funded programs including the Universal Service Fund (“USF”), a subsidy program managed by the Federal Communications Commission (“FCC”), and the Alaska Universal Service Fund (“AUSF”), a similar program managed by the Regulatory Commission of Alaska (the “RCA”). USF funds are disbursed to telecommunication providers through
The Company also recognizes revenue from the Connect America Fund Phase II program (“CAF II”) which offers subsidies to carriers to expand broadband coverage in designated areas. Under CAF II, the Company’s US Telecom segment will receive an aggregate of $
28
Both the USF and CAFII programs are subject to certain operational and reporting compliance requirements. The Company believes it is in compliance with these requirements as of June 30, 2022. Revenue recognized from the USF and CAFII programs is recognized as revenue from government grants. Revenue from other programs is recognized in accordance with ASC 606.
RDOF (“Rural Digital Opportunities Fund”)
The Company expects to receive approximately $
The Company recorded the amounts below as communication services revenue for the reported periods:
Three months ended | Six months ended | ||||||||||||||||
June 30, 2022 | June 30, 2022 | ||||||||||||||||
US Telecom | International Telecom | Total | US Telecom | International Telecom | Total | ||||||||||||
High cost support | $ | | $ | | $ | | $ | | $ | | $ | | |||||
CAF II | | — | | | — | | |||||||||||
RDOF | | — | | | — | | |||||||||||
Other Programs | | | | | | | |||||||||||
Total | $ | | $ | | $ | | $ | | $ | | $ | | |||||
Three months ended | Six months ended | ||||||||||||||||
June 30, 2021 | June 30, 2021 | ||||||||||||||||
US Telecom | International Telecom | Total | US Telecom | International Telecom | Total | ||||||||||||
High cost support | $ | | $ | | $ | | $ | | $ | | $ | | |||||
CAF II | | — | | | — | | |||||||||||
Other Programs | | | | | | | |||||||||||
Total | $ | | $ | | $ | | $ | | $ | | $ | | |||||
In 2018, the FCC initiated a proceeding to replace the High Cost Program support received by Viya in the US Virgin Islands with a new Connect USVI Fund. On November 16, 2020, the FCC announced that Viya was not the recipient of the Connect USVI Fund award and authorized funding to be issued to the new awardee in June 2021. Pursuant to the terms of the program and effective in July 2021, Viya’s annual USF support was reduced from $
Construction Grants
The Company has also been awarded construction grants to build network connectivity for eligible communities. The funding of these grants, used to reimburse the Company for its construction costs, is distributed upon completion of a project. As of December 31, 2021, the Company had been awarded approximately $
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completion deadlines beginning in June 2023. Once these projects are constructed, the Company is obligated to provide service to the participants. The Company expects to meet all requirements associated with these grants.
During July 2022, we were awarded a grant for approximately $
Replace and Remove Program
On July 15, 2022, the Company was notified that it was an approved participant in the Federal Communication Commission’s Secure and Trusted Communications Networks Reimbursement Program (the “Replace and Remove Program”), designed to reimburse providers of communications services for reasonable costs incurred in the required removal, replacement, and disposal of covered communications equipment or services, that have been deemed to pose a national security risk, from their networks. Pursuant to the Replace and Remove Program, the Company was allocated up to approximately $
CARES Act
As of December 31, 2020, the Company had received $
CBRS Auction
During the third quarter of 2020, the Company participated in the FCC’s Citizens Broadband Radio Service (CBRS) auction for Priority Access Licenses (PALs) in the 3.5 GHz spectrum band. These PALs are licensed on a county-by-county basis and are awarded for a
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10. RETIREMENT PLANS
Multi-employer Defined Benefit Plan
Pension benefits for substantially all of the Company’s Alaska-based employees are provided through the Alaska Electrical Pension Fund (“AEPF”). The Company pays a contractual hourly amount based on employee classification or base compensation to the AEPF. As a multi-employer defined benefit plan, the accumulated benefits and plan assets are not determined for, or allocated separately to, the individual employer. This plan was not in endangered or critical status during the plan year.
Defined Benefit Plan
The Company has noncontributory defined benefit pension and noncontributory defined medical, dental, vision, and life benefit plans for eligible employees in its International Telecom segment who meet certain eligibility criteria. As part of the Alaska Transaction, the Company acquired a defined benefit pension plan and a post-retirement medical plan covering certain employees. The pension plan had a projected benefit obligation of $
The Company recorded the net periodic benefit cost identified below (in thousands):
Three months ended | Six months ended | ||||||||||||||||||||||
June 30, 2022 |
| June 30, 2021 | June 30, 2022 |
| June 30, 2021 | ||||||||||||||||||
Pension benefits | Postretirement benefits | Pension benefits | Postretirement benefits | Pension benefits | Postretirement benefits | Pension benefits | Postretirement benefits | ||||||||||||||||
Operating expense | |||||||||||||||||||||||
Service cost | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||
Non-operating expense |
|
| |||||||||||||||||||||
Interest cost | | | | | | | | | |||||||||||||||
Expected return on plan assets |
| ( |
| — | ( |
| — |
| ( |
| — | ( |
| — | |||||||||
Settlements | ( | — | — | — | ( | — | — | — | |||||||||||||||
Net periodic pension expense (benefit) | $ | ( | $ | | $ | ( | $ | | $ | ( | $ | | $ | ( | $ | | |||||||
The Company was not required to make contributions to its pension plans during the six months ended June 30, 2022 and 2021. However, the Company periodically evaluates whether to make discretionary contributions. The Company funds its postretirement benefit plans as claims are made and did not make contributions to its pension plans during the three months ended June 30, 2022 and 2021.
11. INCOME TAXES
The Company’s effective tax rate for the three months ended June 30, 2022 and 2021 was
The Company recorded an income tax benefit of $
31
The effective tax rate for the three months ended June 30, 2021 was primarily impacted by the following items: (i) the mix of income generated among the jurisdictions in which the Company operates and (ii) discrete items including a $
The Company’s effective tax rate for the six months ended June 30, 2022 and 2021 was
The Company recorded an income tax benefit of $
The effective tax rate for the six months ended June 30, 2021 was primarily impacted by the following items: (i) the mix of income generated among the jurisdictions in which the Company operates and (ii) discrete items including a $
The Company’s effective tax rate is based upon estimated income before provision for income taxes for the year, composition of the income in different countries, and adjustments, if any, in the applicable quarterly periods for potential tax consequences, benefits and/or resolutions of tax contingencies. The Company’s consolidated tax rate will continue to be impacted by any transactional or one-time items in the future and the mix of income in any given year generated among the jurisdictions in which the Company operates. While the Company believes it has adequately provided for all tax positions, amounts asserted by taxing authorities could materially differ from the Company’s accrued positions as a result of uncertain and complex applications of tax law and regulations. Additionally, the recognition and measurement of certain tax benefits include estimates and judgments by management. Accordingly, the Company could record additional provisions or benefits for US federal, state, and foreign tax matters in future periods as new information becomes available.
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12. EARNINGS PER SHARE AND REDEEMABLE NONCONTROLLING INTERESTS
Earnings Per Share
The following table reconciles the numerator and denominator in the computations of basic and diluted earnings per share (in thousands):
Three months ended June 30, | Six months ended June 30, | ||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||
Numerator: | |||||||||||
Net income (loss) attributable to ATN International, Inc. stockholders | ( | | ( | | |||||||
Less: Preferred dividends | ( | — | ( | — | |||||||
Net income (loss) attributable to ATN International, Inc. common stockholders | $ | ( | $ | | $ | ( | $ | | |||
Denominator: | |||||||||||
Weighted-average shares outstanding- Basic | | | | | |||||||
Effective of dilutive securities: | |||||||||||
Stock options, restricted stock units and performance stock units | — | | — | | |||||||
Weighted-average shares outstanding- Diluted | | | | | |||||||
For each of the three and six months ended June 30, 2021, the calculations of basic and diluted weighted average shares of common stock outstanding do not include
Redeemable Noncontrolling Interests
In connection with the Alaska Transaction, the Company has accounted for the Freedom 3 Investment as redeemable noncontrolling interests in its consolidated financial statements. The redeemable noncontrolling interests consist of $
For the three and six months ended June 30, 2022, the Company allocated losses of $
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The following table provides a roll forward of the activity related to the Company’s redeemable noncontrolling interests for the six months ended June 30, 2022:
Redeemable Preferred Units | Redeemable Common Units | Total Redeemable Noncontrolling Interests | ||||||
Balance, December 31, 2021 | $ | | $ | | $ | | ||
Accrued preferred dividend | | — | | |||||
Allocated net loss | — | ( | ( | |||||
Change in fair value | — | | | |||||
Balance, June 30, 2022 | $ | | $ | | $ | | ||
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13. SEGMENT REPORTING
The Company has the following
The following tables provide information for each operating segment (in thousands):
For the Three Months Ended June 30, 2022 | |||||||||||||||
|
|
|
| ||||||||||||
International | US | Renewable | Corporate and | ||||||||||||
Telecom | Telecom | Energy | Other (1) | Consolidated | |||||||||||
Revenue | |||||||||||||||
Communication Services | |||||||||||||||
Mobility - Business | $ | | $ | | $ | — | $ | — | $ | | |||||
Mobility - Consumer | | | — | — | | ||||||||||
Total Mobility | | | — | — | | ||||||||||
Fixed - Business | | | — | — | | ||||||||||
Fixed - Consumer | | | — | — | | ||||||||||
Total Fixed | |
| |
| — |
| — |
| | ||||||
Carrier Services | | | — | — | | ||||||||||
Other |
| | — | — | — | | |||||||||
Total Communication Services Revenue |
| | | — | — | | |||||||||
Construction | — | | — | — | | ||||||||||
Other | |||||||||||||||
Managed Services | | | — | — | | ||||||||||
Total Other Revenue | | | — | — | | ||||||||||
Total Revenue | | | — | — | | ||||||||||
Depreciation |
| |
| |
| — |
| |
| | |||||
Amortization of intangibles from acquisitions | | | — | — | | ||||||||||
Non-cash stock-based compensation |
| |
| |
| — |
| |
| | |||||
Operating income (loss) |
| |
| ( |
| ( |
| ( |
| | |||||
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For the Three Months Ended June 30, 2021 | |||||||||||||||
|
|
|
|
|
| ||||||||||
International | US | Renewable | Corporate and | ||||||||||||
Telecom | Telecom | Energy | Other (1) | Consolidated | |||||||||||
Revenue | |||||||||||||||
Communication Services | |||||||||||||||
Mobility - Business | $ | | $ | | $ | — | $ | — | $ | | |||||
Mobility - Consumer | | — | — | | |||||||||||
Total Mobility | | | — | — | | ||||||||||
Fixed - Business | | | — | — | | ||||||||||
Fixed - Consumer | | | — | — | | ||||||||||
Total Fixed | | | — | — | | ||||||||||
Carrier Services | | | — | — | | ||||||||||
Other |
| | — | — | — | | |||||||||
Total Communication Services Revenue |
| | | — | — | | |||||||||
Construction | — | | — | — | | ||||||||||
Other | |||||||||||||||
Renewable Energy | — | — | — | — | — | ||||||||||
Managed Services | | — | — | — | | ||||||||||
Total Other Revenue | | — | — | — | | ||||||||||
Total Revenue | | | — | — | | ||||||||||
Depreciation |
| | | — | |
| | ||||||||
Amortization of intangibles from acquisitions | | — | — | — | | ||||||||||
Non-cash stock-based compensation |
| | — | — | |
| | ||||||||
Operating income (loss) |
| | ( | ( | ( |
| | ||||||||
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For the Six Months Ended June 30, 2022 | |||||||||||||||
|
|
|
|
| |||||||||||
International | US | Renewable | Corporate and | ||||||||||||
Telecom | Telecom | Energy | Other (1) | Consolidated | |||||||||||
Revenue | |||||||||||||||
Communication Services | |||||||||||||||
Mobility - Business | $ | | $ | | $ | — | $ | — | $ | | |||||
Mobility - Consumer | | | — | — | | ||||||||||
Total Mobility | | | — | — | | ||||||||||
Fixed - Business | | | — | — | | ||||||||||
Fixed - Consumer | | | — | — | | ||||||||||
Total Fixed | |
| |
| — |
| — |
| | ||||||
Carrier Services | | | — | — | | ||||||||||
Other |
| | — | — | — | | |||||||||
Total Communication Services Revenue |
| | | — | — | | |||||||||
Construction |
| — | | — | — | | |||||||||
Other | |||||||||||||||
Renewable Energy | — | — | — | — | — | ||||||||||
Managed Services | | | — | — | | ||||||||||
Total Other Revenue | | | — | — | | ||||||||||
Total Revenue | | | — | — | | ||||||||||
Depreciation |
| | | — | |
| | ||||||||
Amortization of intangibles from acquisitions | | | — | — | | ||||||||||
Non-cash stock-based compensation |
| | | — | |
| | ||||||||
Operating income (loss) |
| | ( | ( | ( |
| | ||||||||
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For the Six Months Ended June 30, 2021 | |||||||||||||||
|
|
|
| ||||||||||||
International | US | Renewable | Corporate and | ||||||||||||
Telecom | Telecom | Energy | Other (1) | Consolidated | |||||||||||
Revenue | |||||||||||||||
Communication Services | |||||||||||||||
Mobility - Business | $ | | $ | | $ | — | $ | — | $ | | |||||
Mobility - Consumer | | | — | — | | ||||||||||
Total Mobility | | | — | — | | ||||||||||
Fixed - Business | | | — | — | | ||||||||||
Fixed - Consumer | | | — | — | | ||||||||||
Total Fixed | |
| |
| — |
| — |
| | ||||||
Carrier Services | | | — | — | | ||||||||||
Other |
| | — | — | — | | |||||||||
Total Communication Services Revenue |
| | | — | — | | |||||||||
Construction | — | | — | — | | ||||||||||
Other | |||||||||||||||
Construction | — | — | — | — | — | ||||||||||
Renewable Energy | — | — | | — | | ||||||||||
Managed Services | | — | — | — | | ||||||||||
Total Other Revenue | | — | | — | | ||||||||||
Total Revenue | | | | — | | ||||||||||
Depreciation |
| | | | |
| | ||||||||
Amortization of intangibles from acquisitions | | — | — | — | | ||||||||||
Non-cash stock-based compensation |
| | — | | |
| | ||||||||
Operating income (loss) |
| | ( | ( | ( |
| | ||||||||
| (1) | Corporate and Other items refer to corporate overhead costs and consolidating adjustments |
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Selected balance sheet data for each of the Company’s segments as of June 30, 2022 and December 31, 2021 consists of the following (in thousands):
|
|
|
|
|
| ||||||||||
International | US | Renewable | Corporate and | ||||||||||||
Telecom | Telecom | Energy | Other (1) | Consolidated | |||||||||||
June 30, 2022 | |||||||||||||||
Cash, cash equivalents, and short term investments | $ | $ | $ | $ | $ | | |||||||||
Total current assets | | ||||||||||||||
Fixed assets, net | — | | |||||||||||||
Goodwill |
|
|
| — |
| — | | ||||||||
Total assets |
|
|
|
| | ||||||||||
Total current liabilities | | ||||||||||||||
Total debt | | | — | | | ||||||||||
December 31, 2021 | |||||||||||||||
Cash, cash equivalents, and short term investments | $ | | $ | | $ | | $ | | $ | | |||||
Total current assets | | | | | | ||||||||||
Fixed assets, net | | | — | | | ||||||||||
Goodwill |
| |
| |
| — |
| — | | ||||||
Total assets |
| |
| |
| |
| | | ||||||
Total current liabilities | | | | | | ||||||||||
Total debt | | | — | | | ||||||||||
Capital Expenditures | ||||||||||||
|
|
|
| |||||||||
International | US | Corporate and | ||||||||||
Six months ended June 30, | Telecom | Telecom | Other (1) | Consolidated | ||||||||
2022 | $ | | $ | | $ | | $ | | ||||
2021 | | | | | ||||||||
| (1) | Corporate and other items refer to corporate overhead costs and consolidating adjustments |
14. COMMITMENTS AND CONTINGENCIES
Regulatory and Litigation Matters
The Company and its subsidiaries are subject to certain regulatory and legal proceedings and other claims arising in the ordinary course of business, some of which involve claims for damages and taxes that are substantial in amount. The Company believes that, except for the items discussed below, for which the Company is currently unable to predict the final outcome, the disposition of proceedings currently pending will not have a material adverse effect on the Company’s financial position or results of operations.
In 1990, the Company’s Guyana subsidiary, GTT, was awarded a license to provide domestic and international voice and data services in Guyana on an exclusive basis until December 2030. Since 2001, the Government of Guyana has stated its intention to introduce additional competition into Guyana’s telecommunications sector. In connection therewith, the Company and GTT met on several occasions with officials of the Government of Guyana to discuss potential modifications of GTT’s exclusivity and other rights under the existing agreement and license. On October 5, 2020, the Prime Minister of Guyana formally implemented telecommunications legislation previously passed by the Guyana Parliament in 2016 that introduces material changes to many features of Guyana’s existing telecommunications regulatory regime with the intention of creating a more competitive market. At that time, the Company was issued a new license to provide domestic and international voice as well as data services and mobile services in Guyana.
39
Company’s competitors were issued service licenses as well. While the Company has requested details of its competitors’ licenses, such information has not been made public by the Guyana Telecommunications Agency, and the Company is not yet able to ascertain whether the licenses issued to its competitors permit any competitors to provide services that have been subject to GTT’s exclusive rights contained in its 1990 license.
On October 23, 2020, the Government of Guyana also brought into effect new telecommunications regulations called for by the telecommunications legislation. The regulations include new requirements for the market as a whole, which impose costly additional regulatory fees and impact the Company’s operations, administrative reporting and services. There can be no assurance that these regulations will be effectively implemented, or that they will be administered in a fair and transparent manner.
Historically, GTT has been subject to other long-standing litigation proceedings and disputes in Guyana that have not yet been resolved. The Company believes that none of these additional proceedings would, in the event of an adverse outcome, have a material impact on the Company’s consolidated financial position, results of operations or liquidity.
In a letter dated September 8, 2006, the National Frequency Management Unit (“NFMU”) agreed that total spectrum fees in Guyana should not increase for the years 2006 and 2007. However, that letter implied that spectrum fees in 2008 and onward may be increased beyond the amount GTT agreed to with the Government of Guyana. GTT has objected to the NFMU’s proposed action and reiterated its position that an increase in fees prior to development of an acceptable methodology would violate the Government’s prior agreement. In 2011, GTT paid the NFMU $
On May 8, 2009, a GTT competitor, Digicel, filed a lawsuit in Guyana challenging the legality of GTT’s exclusive license rights under Guyana’s constitution and GTT intervened in the suit in order to oppose Digicel’s claims. The case remains pending. The Company believes that any legal challenge to GTT’s exclusive license rights granted in 1990 is without merit and the Company continues to defend vigorously against such legal challenge.
GTT has filed several lawsuits in the High Court of Guyana asserting that, despite its denials, Digicel is engaged in international bypass in violation of GTT’s exclusive license rights, the interconnection agreement between the parties, and the laws of Guyana. Digicel filed counterclaims alleging that GTT has violated the terms of the interconnection agreement and Guyana laws. These suits, filed in 2010 and 2012, have been consolidated with Digicel’s constitutional challenge described above. Prior to the declaration of COVID-19 related travel and business restrictions in Guyana, the consolidated cases were scheduled to proceed to trial in 2020. GTT expects to resume the litigation following the lifting of COVID-19 related restrictions and intends to prosecute these matters vigorously; however, the Company cannot accurately predict at this time when the consolidated suit will go to trial.
GTT is also involved in several legal claims regarding its tax filings with the Guyana Revenue Authority dating back to 1991 regarding the deductibility of intercompany advisory fees as well as other tax assessments. The Company maintains that any liability GTT might be found to have with respect to the disputed tax assessments, totaling $
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On May 20, 2021, the Company was served with a notice of application for enforcement of a foreign judgment with respect to a matter brought by the Trinidad Tobago Electric Commission (“TTEC”) in the High Court of Justice in the Republic of Trinidad and Tobago in August 2013 against the Company and other defendants, alleging breach of contract due to the Company’s failure to pay TTEC in connection with amounts alleged to be owed as reimbursement for cable repair costs. In May 2015, the Company failed to appear in the matter and a default judgment was entered against the Company in the amount of approximately $
In February 2020, the Company’s Alaska Communications subsidiary received a draft audit report from USAC in connection with USAC’s inquiry into Alaska Communications’ funding requests under the Rural Health Care Support Program for certain customers for the time period of July 2012 through June 2017. The draft audit report alleges violations of the FCC’s rules for establishing rural rates and urban rates, the provisioning and billing of ineligible services and products, and violations of the FCC’s competitive bidding rules. Alaska Communications has provided USAC with extensive comments in response to its draft audit report seeking correction of numerous factual and legal errors that it believed it had identified. As a result of these conversations and comments being submitted by Alaska Communications, USAC’s auditors may revise their findings, including the amounts they recommend USAC seek to recover. USAC’s auditors are expected to issue a final audit report incorporating Alaska Communications’ responses that will be sent to USAC’s Rural Health Care Division to review and determine if corrective action would be appropriate. In the event that the Company disagrees with USAC’s final audit report, the Company can appeal that decision to USAC’s Rural Health Care Division and/or the FCC. At this time, the Company cannot predict the contents or timing of the final USAC audit report, the outcome of the audit or the impact on the Company’s business, financial condition, results of operations, or liquidity.
Alaska Communications also received a Letter of Inquiry on March 18, 2018, and subsequent follow up information requests, from the FCC Enforcement Bureau requesting historical information regarding Alaska Communications’ participation in the FCC’s Rural Health Care Support Program. The Company will continue to work constructively with the FCC’s Enforcement Bureau to provide it the information it is seeking. At this time, the Company cannot predict the outcome of the FCC Enforcement Bureau’s inquiry or the impact it may have on its business, financial condition, results of operations or liquidity.
With respect to all of the foregoing matters, the Company believes that some adverse outcome is probable and has accordingly accrued $
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15. SUBSEQUENT EVENTS
See Note 6 for a discussion of our pending acquisition of Sacred Wind Enterprises.
See Note 9 for a discussion regarding government grants to be received for our Southern Apache County Fiber to the Home project and the FCC’s Replace and Remove project.
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
We are a provider of digital infrastructure and communications services in the United States and internationally, including the Caribbean region, with a focus on rural and remote markets with a growing demand for infrastructure investments. Our operating subsidiaries today primarily provide: (i) advanced wireless and wireline connectivity to residential, business and government customers, including a range of high-speed Internet and data services, fixed and mobile wireless solutions, and video and voice services; and (ii) carrier and enterprise communications services, such as terrestrial and submarine fiber optic transport, and communications tower facilities.
At the holding company level, we oversee the allocation of capital within and among our subsidiaries, affiliates, new investments, and stockholders. We also have developed significant operational expertise and resources that we use to augment the capabilities of our individual operating subsidiaries in our local markets. Over the past 10 years, we have built a platform of resources and expertise to support our operating subsidiaries and to improve their quality of service with greater economies of scale and expertise than would typically be available at the operating subsidiary level. We also provide management, technical, financial, regulatory, and marketing services to our operating subsidiaries and typically receive a management fee calculated as a percentage of their revenues, which is eliminated in consolidation. We also actively evaluate potential acquisitions, investment opportunities and other strategic transactions, both domestic and international, and generally look for those that we believe fit our profile of telecommunications businesses and have the potential to complement our “Glass and Steel” and “fiber first” approach in markets while generating steady excess cash flows over extended periods of time. We use the cash generated from our operations to re-invest in organic growth in our existing businesses, to make strategic investments in additional businesses, and to return cash to our investors through dividends or stock repurchases.
For further information about our financial segments and geographical information about our operating revenues and assets, see Notes 1 and 13 to the Consolidated Financial Statements included in this Report.
As of June 30, 2022, we offer the following types of services to our customers:
| ● | Mobility Telecommunications Services. We offer mobile communications services and equipment (“Mobility”) over our wireless networks to both our business and consumer subscribers. In certain markets, mobility services also includes private network services to business customers and municipalities. |
| ● | Fixed Telecommunications Services. We provide fixed data and voice telecommunications services (“Fixed”) to both our business and consumer subscribers in all of our markets. These services include consumer broadband and high speed data solutions for businesses. For some markets, fixed services also include video services and revenue derived from support under certain government programs. |
| ● | Carrier Telecommunication Services. We deliver services (“Carrier Services”) such as wholesale roaming, the leasing of critical network infrastructure such as tower and transport facilities, site maintenance and international long-distance services to other telecommunications providers. |
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| ● | Managed Services. We provide information technology services (“Managed Services”) such as network, application, infrastructure and hosting services to both our business and consumer customers to complement our Fixed Services in our existing markets. |
Through June 30, 2022, we have identified three operating segments to manage and review our operations and to facilitate investor presentations of our results. These three operating segments are as follows:
| ● | International Telecom. In our international markets, we offer Fixed Services, Mobility Services, Carrier Services and Managed Services to customers in Bermuda, the Cayman Islands, Guyana and the US Virgin Islands. |
| ● | US Telecom. In the United States, we offer Fixed Services, Carrier Services, and Managed Services to business and consumer customers in Alaska and the western United States. In the western United States, we also provide Mobility Services and private network services to enterprise and consumer customers. |
| ● | Renewable Energy. In India, we provided distributed generation solar power to commercial and industrial customers through January 27, 2021. See Disposition of International Solar Business for further details. |
The following chart summarizes the operating activities of our principal subsidiaries, the segments in which we report our revenue and the markets we served as of June 30, 2022:
Segment |
| Services |
| Markets |
| Tradenames |
International Telecom |
| Mobility Services |
| Bermuda, Guyana, US Virgin Islands |
| One, GTT+, Viya |
Fixed Services |
| Bermuda, Cayman Islands, Guyana, US Virgin Islands |
| One, Logic, GTT, Viya | ||
Carrier Services | Bermuda, Guyana, US Virgin Islands | One, GTT+, Viya | ||||
Managed Services | Bermuda, Cayman Islands, US Virgin Islands, Guyana | Fireminds, One, Logic, GTT, Viya | ||||
US Telecom |
| Mobility Services |
| United States (rural markets) |
| Choice, Choice NTUA Wireless, Geoverse |
Fixed Services | United States |
| Alaska Communications, Commnet, Choice, Choice NTUA Wireless | |||
Carrier Services | United States | Alaska Communications, Commnet, Essextel | ||||
| Managed Services |
| United States |
| Alaska Communications, Choice | |
Renewable Energy (1) | Solar | India | Vibrant Energy |
| (1) | See Disposition of International Solar Business for further details. |
Pending Acquisition of Sacred Wind Enterprises
On July 26, 2022, we via our newly formed wholly owned subsidiary Alloy, Inc. (“Alloy”), entered into a stock purchase agreement (the “Purchase Agreement”) to acquire all of the issued and outstanding stock of Sacred Wind Enterprises, Inc. (“Sacred Wind”), a rural telecommunications provider in New Mexico. Under the Purchase Agreement, we will contribute all of our ownership interests in our Commnet Wireless business to Alloy, and issue Alloy equity to
43
the Sacred Wind stockholders representing the combined ownership of Sacred Wind and Commnet. The acquisition is subject to certain closing conditions, including the receipt of required third party and regulatory approvals such as approval of the Federal Communications Commission. Under the Purchase Agreement, Sacred Wind will keep in place its approximately $32 million in debt and we will issue consideration of a combination of $24 million in cash, the issuance of $13 million of equity representing an approximate 6% in Alloy, Inc. In addition, the Purchase Agreement includes certain earn-outs, the accounting for which will be determined upon our completion of the acquisition, to be paid to the Sacred Wind stockholders.
We believe that the acquisition of Sacred Wind will expand our infrastructure reach and broadband services in the rural Southwest and increase our wholesale carrier, residential and business broadband services.
The acquisition of Sacred Wind is expected to close subject to Federal Communications Commission and other required approvals in the fourth quarter of 2022 or first quarter of 2023.
Completed Acquisition of Alaska Communications
On July 22, 2021, we completed the acquisition of Alaska Communications Systems Group, Inc. (“Alaska Communications”), a publicly listed company, for approximately $339.5 million in cash, net of cash acquired, (the “Alaska Transaction”). Alaska Communications provides broadband telecommunication and managed information technology services to customers in the state of Alaska and beyond using its statewide and interstate telecommunications network.
In conjunction with the Alaska Transaction, we entered into an agreement with affiliates and investment funds managed by Freedom 3 Capital, LLC as well as other institutional investors (collectively the “Freedom 3 Investors”). The Freedom 3 Investors contributed $71.5 million in conjunction with the Alaska Transaction (the “Freedom 3 Investment”). The Freedom 3 Investment consists of common and preferred equity instruments in our subsidiary of which holds the ownership of Alaska Communications. We accounted for the Freedom 3 Investment as a redeemable noncontrolling interest in our consolidated financial statements and we also entered into a financing transaction drawing $220 million on a new credit facility to complete the Alaska Transaction. As a result of the Alaska Transaction, we own approximately 52% of the common equity of Alaska Communications and control its operations and management. Beginning on July 22, 2021, the results of Alaska Communications are included in our US Telecom segment.
See Liquidity and Capital Resources for a discussion regarding the credit agreement used to help finance the Alaska Transaction.
COVID-19
We are continuing to monitor and assess the effects of the ongoing COVID-19 pandemic on our commercial operations, the safety of our employees and their families, our sales force and customers.
The preparation of the condensed consolidated financial statements requires us to make estimates, judgments and assumptions, which are evaluated on an ongoing basis, which may affect the reported amounts of assets, liabilities, equity, revenues and expenses and related disclosure of contingent assets and liabilities. We assessed certain accounting matters and estimates that generally require consideration of forecasted financial information in context with the information and estimates reasonably available to us and the unknown future impacts of COVID-19 as of June 30, 2022 and through the date of this report. The accounting matters assessed included, but were not limited to, the allowance for credit losses, the carrying value of goodwill and other long-lived assets, financial assets, valuation allowances for tax assets and revenue recognition.
Our assessment of the impact of COVID-19 on our operations did not indicate that there was a material adverse impact to our consolidated financial statements as of and for the three months ended June 30, 2022. However, future assessments of the impacts of COVID-19, as well as other factors, including the possible reinstatement of certain COVID-19 travel-related and stay-at-home restrictions, could result in material adverse impacts to our consolidated financial statements in future reporting periods. For example, we may experience difficulty in procuring network or retail equipment, such as handsets for subscribers, as a result of COVID-19 restrictions and related supply chain challenges. In addition, there is increased uncertainty related to predicting subscribers’ procurement behavior for services.
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Disposition of International Solar Business
In January 2021, we completed the sale of 67% of the outstanding equity in our business that owns and operates distributed generation solar power projects operated under the Vibrant name in India (the “Vibrant Transaction”). The post-sale results of our ownership interest in Vibrant, representing 33% of Vibrant’s profits and losses, will be recorded through the equity method of accounting within the Corporate and Other operating segment. We will continue to present the historical results of our Renewable Energy segment for comparative purposes.
The operations of Vibrant did not qualify as discontinued operations because the disposition did not represent a strategic shift that had a major effect on our operations and financial results.
FirstNet Agreement
In July 2019, we entered into a Network Build and Maintenance Agreement with ATT Mobility, LLC (“ATT”) that we amended in August 2020, May 2021 and August 2022 (the “FirstNet Agreement”). In connection with the FirstNet Agreement, we are building a portion of ATT’s network for the First Responder Network Authority (“FirstNet”) in or near our current operating area in the Western United States. Pursuant to the FirstNet Agreement and subject to certain limitations contained therein, all cell sites must be completed and accepted within a specified period of time. Since inception of the project through June 30, 2022, we have recorded $52.1 million in construction revenue, including $5.3 million during 2022. In 2022, we also expect to record additional costs of construction revenue, as sites are completed, that will approximate that revenue. Revenues from construction are expected to have minimal impact on operating income. The network build portion of the FirstNet Agreement has continued during the COVID-19 pandemic, but the overall timing of the build schedule has been delayed.
Following acceptance of a cell site, ATT will own the cell site and we will assign to ATT any third-party tower lease applicable to such cell site. If the cell site is located on a communications tower we own, ATT will pay us pursuant to a separate lease agreement for an initial term of eight years. In addition to building the network, we will provide ongoing equipment and site maintenance and high-capacity transport to and from these cell sites for an initial term ending in 2029.
ATT will continue to use our wholesale domestic mobility network for roaming services at a fixed rate per site during the construction period until such time as the cell site is transferred to ATT. Thereafter, revenue from the maintenance, leasing and transport services provided to ATT is expected to generally offset revenue from wholesale mobility roaming services. We are currently receiving revenue from the FirstNet Transaction and expect overall operating income contributions from the FirstNet Transaction to have a relatively steady impact going forward.
Universal Service Fund and Connect America Fund Phase II Programs
We recognize revenue from several government funded programs including the USF, a subsidy program managed by the Federal Communications Commission (“FCC”), and the Alaska Universal Service Fund (“AUSF”), a similar program managed by the Regulatory Commission of Alaska (the “RCA”). USF funds are disbursed to telecommunication providers through four programs: the High Cost Program; the Low Income Program (“Lifeline Program”); the Schools and Libraries Program (“E-Rate Program”); and the Rural Health Care Support Program.
We also recognize revenue from the Connect America Fund Phase II program (“CAF II”) which offers subsidies to carriers to expand broadband coverage in designated areas. Under CAF II, our US Telecom segment will receive an aggregate of $27.7 million annually through December 2025 and an aggregate of $8.0 million annually from January 2026 through July 2028.
Both the USF and CAFII programs are subject to certain operational and reporting compliance requirements. We believe we are in compliance with these requirements as of June 30, 2022.
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In 2018, the FCC initiated a proceeding to replace the High Cost Program support received by Viya in the US Virgin Islands with a new Connect USVI Fund. On November 16, 2020, the FCC announced that Viya was not the recipient of the Connect USVI Fund award and authorized funding to be issued to the new awardee in June 2021. Pursuant to the terms of the program and effective in July 2021, Viya’s annual USF support was reduced from $16.4 million to $10.9 million. In July 2022, this support will be reduced again to $5.5 million for the annual period through June 2023. Thereafter, Viya will not receive High Cost Program support.
RDOF (“Rural Digital Opportunities Fund”)
We expect to receive approximately $20.1 million over 10 years to provide broadband and voice coverage to over 10,000 households in the United States (not including Alaska) under the 2020 Rural Digital Opportunity Fund Phase I Auction (“RDOF”). We recorded $0.5 million and $1.0 million of revenue from the RDOF program during the three and six months ended June 30, 2022, respectively.
Construction Grants
We have also been awarded construction grants to build network connectivity for eligible communities. The funding of these grants, used to reimburse us for our construction costs, is distributed upon completion of a project. As of December 31, 2021, we had been awarded approximately $27.9 million of such grants. We were awarded $0.4 million of additional grants and cancelled $2.1 million of previously awarded grants during the three months ended June 30, 2022. Of this $26.2 million of retained awards, we have completed our construction obligations on $17.1 million of these projects and $9.1 million of such construction obligations remain with completion deadlines beginning in June 2023. Once these projects are constructed, we are obligated to provide service to the participants. We expect to meet all requirements associated with these grants.
Replace and Remove Program
On July 15, 2022, we were notified that we were an approved participant in the Federal Communication Commission’s Secure and Trusted Communications Networks Reimbursement Program (the “Replace and Remove Program”), designed to reimburse providers of communications services for reasonable costs incurred in the required removal, replacement, and disposal of covered communications equipment or services, that have been deemed to pose a national security risk, from their networks. Pursuant to the Replace and Remove Program, we were allocated up to approximately $207 million in reimbursement amounts to cover documented and approved costs to remove and securely destroy all ZTE communications equipment and services in our U.S. networks and replace such equipment. The Replace and Remove Program requires that we complete our first request for reimbursement for services performed under the program no later than July 14, 2023 and that we complete the project no later than one year from submitting our initial reimbursement request. We are currently assessing the impact of this program on our financial statements and anticipates that we will be able to meet the deadlines and requirements of the program.
CBRS Auction
During the third quarter of 2020, we participated in the FCC’s Citizens Broadband Radio Service (CBRS) auction for Priority Access Licenses (PALs) in the 3.5 GHz spectrum band. These PALs are licensed on a county-by-county basis and are awarded for a 10-year renewable term. We were a winning bidder for PALs located strategically throughout the United States at a total cost of approximately $20.4 million. In the third quarter of 2022, we surrendered a portion of the PALs that we won in the auction in exchange for repayment of the approximately $1.1 million paid for such licenses and entered into a Consent Decree with the FCC with respect to such surrender and receipt of the remaining licenses. In connection with the awarded licenses, we will have to achieve certain CBRS spectrum build out obligations. We currently expect to comply with all applicable requirements related to these licenses.
Presentation of Revenue
Effective July 1, 2021, we began to categorize Mobility revenue and Fixed revenue as either “consumer” or “business” based upon the characteristics of our subscribers. Effective October 1, 2021, our statement of operations
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separately reflects Construction revenue. All periods presented have been adjusted to conform to these presentation updates.
Presentation of Operating Expenses
Effective January 1, 2021, we changed our presentation of operating expenses in the Condensed Consolidated Statements of Operations by combining the previously disclosed Termination and Access Fees with Engineering and Operations as the newly represented Cost of communications services and other. In addition, the previously disclosed Sales, Marketing and Customer Service expenses are now combined with the previously disclosed General and Administrative expenses within the newly represented Selling, General and Administrative expenses. The change in presentation was made to better align our results with industry standards. Cost of construction services continues to be broken out separately and all depreciation and amortization continues to be shown separately.
Selected Segment Financial Information
The following represents selected segment information for the three months ended June 30, 2022 and 2021 (in thousands):
For the Three Months Ended June 30, 2022 | |||||||||||||||
|
|
|
|
| |||||||||||
International | US | Renewable | Corporate and | ||||||||||||
Telecom | Telecom | Energy | Other (1) | Consolidated | |||||||||||
Revenue | |||||||||||||||
Communication Services | |||||||||||||||
Mobility - Business | $ | 3,675 | $ | 301 | $ | — | $ | — | $ | 3,976 | |||||
Mobility - Consumer | 21,279 | 1,549 | — | — | 22,828 | ||||||||||
Total Mobility | 24,954 | 1,850 | — | — | 26,804 | ||||||||||
Fixed - Business | 16,996 | 31,866 | — | — | 48,862 | ||||||||||
Fixed - Consumer | 41,353 | 19,166 | — | — | 60,519 | ||||||||||
Total Fixed |
| 58,349 |
| 51,032 |
| — |
| — |
| 109,381 | |||||
Carrier Services | 3,421 | 31,753 | — | — | 35,174 | ||||||||||
Other |
| 436 |
| — |
| — |
| — |
| 436 | |||||
Total Communication Services Revenue | 87,160 | 84,635 | — | — | 171,795 | ||||||||||
Construction | — | 3,297 | — | — | 3,297 | ||||||||||
Other | |||||||||||||||
Managed Services | 1,246 | 3,159 | — | — | 4,405 | ||||||||||
Total Other Revenue | 1,246 | 3,159 | — | — | 4,405 | ||||||||||
Total Revenue | 88,406 | 91,091 | — | — | 179,497 | ||||||||||
Operating income (loss) |
| 11,646 |
| (281) |
| (22) |
| (9,621) |
| 1,722 | |||||
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For the Three Months Ended June 30, 2021 | |||||||||||||||
|
|
|
|
| |||||||||||
International | US | Renewable | Corporate and | ||||||||||||
Telecom | Telecom | Energy | Other (1) | Consolidated | |||||||||||
Revenue | |||||||||||||||
Communication Services | |||||||||||||||
Mobility - Business | $ | 1,298 | $ | 342 | $ | — | $ | — | $ | 1,640 | |||||
Mobility - Consumer | 21,456 | 2,065 | — | — | 23,521 | ||||||||||
Total Mobility | 22,754 | 2,407 | — | — | 25,161 | ||||||||||
Fixed - Business | 16,855 | 2,031 | — | — | 18,886 | ||||||||||
Fixed - Consumer | 42,271 | 3,846 | — | — | 46,117 | ||||||||||
Total Fixed |
| 59,126 |
| 5,877 |
| — |
| — |
| 65,003 | |||||
Carrier Services | 2,523 | 20,038 | — | — | 22,561 | ||||||||||
Other |
| 239 |
| — |
| — |
| — |
| 239 | |||||
Total Communication Services Revenue | 84,642 | 28,322 | — | — | 112,964 | ||||||||||
Construction | — | 9,325 | — | — | 9,325 | ||||||||||
Other | |||||||||||||||
Renewable Energy | — | — | — | — | — | ||||||||||
Managed Services | 1,576 | — | — | — | 1,576 | ||||||||||
Total Other Revenue | 1,576 | — | — | — | 1,576 | ||||||||||
Total Revenue | 86,218 | 37,647 | — | — | 123,865 | ||||||||||
Operating income (loss) |
| 14,643 |
| (556) |
| (771) |
| (10,411) |
| 2,905 | |||||
(1) Corporate and Other items refer to corporate overhead costs and consolidating adjustments
A comparison of our segment results for the three months ended June 30, 2022, and 2021 is as follows:
International Telecom. Revenues within our International Telecom segment increased $2.2 million, or 2.6%, to $88.4 million from $86.2 million for the three months ended June 30, 2022 and 2021, respectively, as a result of an increase in Fixed and Mobility subscribers within all of our international markets. In addition, our US Virgin Islands and Bermuda markets recognized an increase of $0.9 million in Carrier Services revenue as a result of increased tourism as certain COVID-19 related travel and stay-at-home restrictions were lifted. These increases, however, were partially offset by the $1.4 million scheduled step down in federal support revenues in the US Virgin Islands.
Operating expenses within our International Telecom segment increased by $5.2 million, or 7.3%, to $76.8 million from $71.6 million for the three months ended June 30, 2022 and 2021, respectively. The increase in operating expenses was primarily the result of an increase in direct costs, primarily roaming expenses related to increased tourism in the US Virgin Islands and Bermuda, increased equipment costs, an increase in sales and marketing expenses to support the expansion of our subscriber base and additional costs for our continued investment in network expansion and enhancement.
As a result, our International Telecom segment’s operating income decreased $3.0 million, or 20.5%, to $11.6 million from $14.6 million for the three months ended June 30, 2022 and 2021, respectively.
US Telecom. Revenue within our US Telecom segment increased by $53.5 million, or 142.3%, to $91.1 million from $37.6 million for the three months ended June 30, 2022 and 2021, respectively, primarily as a result of $44.1 million associated with the Alaska Transaction partially offset by a $6.0 million reduction in construction revenue related to the FirstNet Transaction as well as a reduction in roaming revenue due to certain restructured carrier contracts in our western United States operations.
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Operating expenses within our US Telecom segment increased $53.2 million to $91.4 million from $38.2 million for the three months ended June 30, 2022 and 2021, respectively, as a result of the Alaska Transaction and increases in other expenses being incurred in connection with both the FirstNet Transaction and the CARES Act-funded build-out of rural broadband operations, partially offset by a decrease in FirstNet construction costs of $6.2 million.
As a result of the above, our US Telecom segment’s operating loss decreased by $0.3 million to a loss of $0.3 million from a loss of $0.6 million for the three months ended June 30, 2022 and 2021, respectively.
Renewable Energy. Until the completion of the Vibrant Transaction on January 27, 2021, we distributed generation solar power to commercial and industrial customers under the Vibrant name in India. Accordingly, we did not generate revenue or incur operating expenses within our Renewable Energy segment subsequent to that date.
The following represents a year over year discussion and analysis of our results of operations for the three months ended June 30, 2022 and 2021 (in thousands):
Three Months Ended | Amount of | Percent |
| |||||||||
June 30, | Increase | Increase |
| |||||||||
2022 | 2021 | (Decrease) | (Decrease) |
| ||||||||
REVENUE: |
|
|
|
|
|
|
|
| ||||
Communication services | $ | 171,795 | $ | 112,964 | $ | 58,831 |
| 52.1 | % | |||
Construction | 3,297 | 9,325 | (6,028) |
| (64.6) | |||||||
Other |
| 4,405 |
| 1,576 |
| 2,829 |
| 179.5 | ||||
Total revenue |
| 179,497 |
| 123,865 |
| 55,632 |
| 44.9 | ||||
OPERATING EXPENSES (excluding depreciation and amortization unless otherwise indicated): | ||||||||||||
Cost of communications services and other |
| 77,860 |
| 48,479 |
| 29,381 |
| 60.6 | ||||
Cost of construction revenue | 3,286 | 9,535 | (6,249) |
| (65.5) | |||||||
Selling, general and administrative |
| 59,178 |
| 40,652 |
| 18,526 |
| 45.6 | ||||
Transaction-related charges |
| 412 |
| 1,396 |
| (984) |
| (70.5) | ||||
Depreciation |
| 33,817 |
| 19,739 |
| 14,078 |
| 71.3 | ||||
Amortization of intangibles from acquisitions | 3,250 | 416 | 2,834 |
| 681.3 | |||||||
(Gain) Loss on disposition of long-lived assets | (28) | 743 | (771) |
| (103.8) | |||||||
Total operating expenses |
| 177,775 |
| 120,960 |
| 56,815 |
| 47.0 | ||||
Income from operations |
| 1,722 |
| 2,905 |
| (1,183) |
| (40.7) | ||||
OTHER INCOME (EXPENSE): | ||||||||||||
Interest income |
| — |
| 46 |
| (46) |
| n/m | ||||
Interest expense | (4,278) | (1,137) | (3,141) |
| 276.3 | |||||||
Other income (expense) |
| (2,724) |
| (66) |
| (2,658) |
| n/m | ||||
Other income (expense), net |
| (7,002) |
| (1,157) |
| (5,845) |
| 505.2 | ||||
INCOME BEFORE INCOME TAXES |
| (5,280) |
| 1,748 |
| (7,028) |
| (402.1) | ||||
Income tax provision |
| (3,971) |
| (1,542) |
| (2,429) |
| 157.5 | ||||
NET INCOME (LOSS) |
| (1,309) |
| 3,290 |
| (4,599) |
| (139.8) | ||||
(Net income) loss attributable to noncontrolling interests, net of tax: |
| 784 |
| (1,271) |
| 2,055 |
| (161.7) | ||||
NET INCOME (LOSS) ATTRIBUTABLE TO ATN INTERNATIONAL, INC. STOCKHOLDERS | $ | (525) | $ | 2,019 | $ | (2,544) |
| (126.0) | % | |||
n/m = not meaningful
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Communications Services Revenue
Mobility Revenue. Our Mobility revenue consists of retail revenue generated within both our International Telecom and US Telecom segments by providing retail mobile voice and data services over our wireless networks as well as through the sale and repair services of related equipment, such as handsets and other accessories, to our retail subscribers. Mobility revenue increased by $1.6 million, or 6.3%, to $26.8 million for the three months ended June 30, 2022 from $25.2 million for the three months ended June 30, 2021. Of this increase, $2.3 million related to an increase in revenue from business customers while revenue from consumers declined by $0.7 million. The increase in Mobility revenue, within our segments, consisted of the following:
| ● | International Telecom. Within our International Telecom segment, Mobility revenue increased by $2.2 million, or 9.6%, to $25.0 million for the three months ended June 30, 2022 from $22.8 million for the three months ended June 30, 2021. Mobility revenue increased in each of our markets as total revenue from business customers increased by $2.4 million partially offset by a reduction in revenue from consumers of $0.2 million. The net increases were the result of improved retail and marketing strategies which lead to an increase in subscribers in all of our markets and an increase in equipment and services revenues in certain markets. |
| ● | US Telecom. Mobility revenue within our US Telecom segment decreased by $0.5 million, or 20.8%, to $1.9 million from $2.4 million for the three months ended June 30, 2022 and 2021, respectively, as a result of a decrease in subscribers within our retail operations. |
We expect that Mobility revenue within both our US Telecom and International Telecom segments may increase as a result of an increase in subscribers if certain COVID-19 travel related restrictions continue to be lifted. However, such growth in both segments may be partially offset due to increased competition, and if COVID-19 related travel restrictions are reinstated so as to result in significant business interruptions and retail store closures.
Apart from possible government issued travel restrictions, we currently cannot assess how the impact of COVID-19 may influence our subscribers’ procurement behavior for our services or how that behavior will affect our Mobility revenues in the foreseeable future.
Fixed Revenue. Fixed revenue is primarily generated by broadband, voice, and video service revenues provided to retail and business customers over our wireline networks. Fixed revenue within our US Telecom segment also includes revenue from the Connect America Fund Phase II program awards in the western United States and Alaska, as well as revenue from the Alaska Universal Service Fund. Within our International Telecom segment, Fixed revenue also includes funding under the FCC’s High Cost Program in the US Virgin Islands. Fixed revenue increased by $44.4 million, or 68.3%, to $109.4 million from $65.0 million for the three months ended June 30, 2022 and 2021, respectively. Of this increase, $30.0 million relates to revenue from business customers while the remaining increase of $14.4 million pertains to consumers. The increase in Fixed revenue, within our segments, consisted of the following:
| ● | International Telecom. Within our International Telecom segment, Fixed revenue decreased by $0.8 million, or 1.4%, to $58.3 million from $59.1 million for the three months ended June 30, 2022 and 2021, respectively, primarily as a result of the previously disclosed and scheduled $1.4 million reduction in revenue from the FCC’s High Cost Program within our Viya operations. Offsetting this decrease was an increase in revenue from fixed broadband fiber subscribers and services to further enable and support remote working in our markets. |
| ● | US Telecom. Fixed revenue within our US Telecom segment increased by $45.1 million, to $51.0 million from $5.9 million for the three months ended June 30, 2022 and 2021, respectively. This increase was related to the Alaska Transaction, which generated $44.1 million of Fixed revenue during the three months ended June 30, 2022, and a $1.0 million increase, within the western United States, related to an increase in usage for both business and consumer subscribers to support our subscribers’ increase in their remote working. |
Fixed revenue within our International Telecom segment may further decrease as a result of the loss of USF funding in the US Virgin Islands, a decrease in demand for our video services due to subscribers using alternative
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methods to receive video content, and if COVID-19 travel related restrictions are reinstated in some of our international markets. Such decreases, however, may be partially offset as a result of an increase in broadband subscribers as workers continue to shift to remote working, subscribers adopting higher bandwidth offerings at higher price points and in connection with certain new contracts with oil and gas providers in Guyana.
Within our US Telecom segment, Fixed revenue is expected to increase as both our Alaska operations and our western United States operations further deploy broadband access to both consumers and businesses.
Apart from possible government issued travel restrictions, we currently cannot assess how the impact of any COVID-19 restrictions may influence our subscribers’ procurement behavior for our services or how that behavior will affect our Fixed revenue in the foreseeable future.
Carrier Services Revenue. Carrier Services revenue is generated by both our International Telecom and US Telecom segments. Within our International Telecom segment, Carrier Services revenue includes international long-distance services, roaming revenues generated by other carriers’ customers roaming into our retail markets, transport services and access services provided to other telecommunications carriers. Within our US Telecom segment, Carrier Services revenue includes services provided under the FirstNet Transaction, wholesale roaming revenues, the provision of network switching services, tower lease revenue and other services provided to other carriers. Carrier Services revenue increased by $12.6 million, or 55.8%, to $35.2 million from $22.6 million for the three months ended June 30, 2022 and 2021, respectively. The increase, within our segments, consisted of the following:
| ● | International Telecom. Within our International Telecom segment, Carrier Services revenue increased by $0.9 million, or 36.0%, to $3.4 million from $2.5 million for the three months ended June 30, 2022 and 2021, respectively, as a result of an increase in tourism within the US Virgin Islands and Bermuda, that resulted in increased roaming revenues. |
| ● | US Telecom. Carrier Services revenue within our US Telecom segment increased by $11.8 million, or 59.0%, to $31.8 million from $20.0 million, for the three months ended June 30, 2022 and 2021, respectively, primarily as a result of the Alaska Transaction, which generated $15.4 million of Carrier Services revenue during the three months ended June 30, 2022 and an increase within our wholesale long-distance voice services business of $0.6 million. These increases were partially offset by the $4.2 million revenue reduction in our western United States operations as a result of the restructure of certain carrier contracts. |
Within our International Telecom segment, Carrier Services revenue may continue to increase if tourism continues to move toward a return to pre-pandemic levels. Apart from possible government issued travel restrictions, we currently cannot assess how the impact of COVID-19 may influence our subscribers’ procurement behavior for our services or how that behavior will affect our revenues in the foreseeable future. Also, within our International Telecom segment, we expect that Carrier Services revenue from our international long-distance business in Guyana may decrease as consumers seek to use alternative technology services to place long-distance calls. In addition, such revenue may decline as the result of the implementation, by the Government of Guyana, of passed legislation which terminates our right to be the exclusive provider of domestic Fixed and international long-distance service in Guyana. While the loss of our exclusive rights may cause an immediate reduction in our Carrier Services revenue, the complete impact of the new legislation to our operations will not be fully known until the Government of Guyana makes the terms and conditions of licenses issued to two of our competitors available to us. Over the longer term, such declines in Carrier Services revenue may be offset by increased Fixed revenue from broadband services to consumers and enterprises in Guyana, increased Mobility revenue from an increase in regulated local calling rates in Guyana or possible economic growth within that country.
Within our US Telecom segment, Carrier Services revenue may decrease from the impact of continued reduced contractual wholesale roaming rates and imposed revenue caps with our Carrier customers. We believe that maintaining roaming favorable to our carrier customers allows us to preserve revenue for a longer period of time while creating the potential for long-lived shared infrastructure solutions for carriers in areas they may consider to be non-strategic.
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The most significant competitive factor we face within our US Telecom segment is the extent to which our carrier customers in our wholesale carrier services business choose to roam on our networks and lease our tower space and transport services or elect to build or acquire their own infrastructure in a market, reducing or eliminating their need for our services in those markets. We also face competition from other providers of such shared infrastructure solutions. In the past, we have entered into buildout projects with existing carrier customers to help these customers accelerate the buildout of a given area in exchange for the carrier’s agreement to lease us spectrum in that area and enter into a contract with specific pricing and terms. Historically, these arrangements have differed from our FirstNet Transaction and have typically included a purchase right in favor of the carrier to purchase that portion of the network for a predetermined price, depending on when the right to purchase is exercised.
Other Communications Services Revenue. Other Communications Services revenue includes miscellaneous services that the operations within our International Telecom segment provide to retail subscribers. Other Communications Services revenue increased to $0.4 million from $0.2 million for the three months ended June 30, 2022 and 2021, respectively.
Construction Revenue
Construction revenue represents revenue generated within our US Telecom segment for the construction of network cell sites related to the FirstNet Agreement. During the three months ended June 30, 2022 and 2021, Construction revenue decreased to $3.3 million from $9.3 million, respectively, as a result of a decrease in the number of sites completed during the three months ended June 30, 2022 as compared to the same period in 2021. As of June 30, 2022, 65% of the cell sites related to the FirstNet Agreement were completed and we expect another 20% of the total build to be completed during second half of 2022 with the remainder to be completed in early 2023.
Other Revenue
Renewable Energy Revenue. We did not generate any renewable energy revenue during the three months ended June 30, 2022 or 2021 as a result of the Vibrant Transaction.
Managed Services Revenue. Managed Services revenue is generated within both our International and US Telecom segments and includes network, application, infrastructure, and hosting services.
Managed Services revenue increased by $2.8 million to $4.4 million from $1.6 million for the three months ended June 30, 2022 and 2021, respectively, as a result of the Alaska Transaction, which generated $3.2 million of Managed Services revenue during the three months ended June 30, 2022. Our Managed Services revenue in our International Telecom segment decreased $0.4 million, or 25.0%, to $1.2 million from $1.6 million for the three months ended June 30, 2022 and 2021, respectively.
We expect that Managed Services revenue may increase in our both our US and International Telecom segments as a result of our continued effort to sell certain Managed Services solutions to both our consumer and business customers in all of our markets.
Operating Expenses
Cost of communication services and other. Cost of communication services and other are charges that we incur for voice and data transport circuits (in particular, the circuits between our Mobility sites and our switches), internet capacity, video programming costs, access fees we pay to terminate our calls, telecommunication spectrum fees and direct costs associated within our managed services businesses. Cost of communication services and other also includes expenses associated with developing, operating, upgrading and supporting our telecommunications networks, including the salaries and benefits paid to employees directly involved in the development and operation of those businesses, as well as bad debt reserves and the cost of handsets and customer resale equipment incurred by our retail businesses.
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Cost of communication services and other increased by $29.4 million, or 60.6%, to $77.9 million from $48.5 million for the three months ended June 30, 2022 and 2021, respectively. The net increase in cost of communication services and other, within our segments, consisted of the following:
| ● | International Telecom. Within our International Telecom segment, cost of communication services and other increased by $1.6 million, or 4.8%, to $34.9 million from $33.3 million, for the three months ended June 30, 2022 and 2021, respectively. This increase was the result of an increase in roaming expense, due to an increase in related roaming revenues from higher levels of travel and tourism in the US Virgin Islands and Bermuda, increased equipment costs, and increases from certain network enhancements. |
| ● | US Telecom. Cost of communication services and other within our US Telecom segment increased by $27.4 million, or 175.6%, to $43.0 million from $15.6 million for the three months ended June 30, 2022 and 2021, respectively. This increase was a result of the Alaska Transaction which incurred $26.9 million of these costs during 2022 and a $0.8 million increase in our wholesale long-distance voice services business needed to support its increased revenue partially offset by a reduction of costs within our private network business. |
We expect that cost of communication services and other may increase within both our International and US Telecom segments due to an expected increase in roaming and other termination costs if COVID-19 related travel restrictions continue to be lifted. Within the US Telecom segment, we expect an increase in the expenses associated with our funding award under the CARES Act and anticipated expenses in connection with our performance under the construction phase of our FirstNet Transaction which is expected to be completed in early 2023. In addition, we expect cost of services may increase as a result of continued inflationary pressure, issues facing the global supply chain, and geopolitical uncertainty.
Cost of construction revenue. Cost of construction revenue includes the expenses incurred in connection with the construction of and the delivery to ATT of cell sites in accordance with our FirstNet Agreement. During the three months ended June 30, 2022 and June 30, 2021, cost of construction revenue decreased to $3.3 million from $9.5 million as a result of a decrease in the number of sites completed during the three months ended June 30, 2022 as compared to the same period in 2021. As of June 30, 2022, 65% of the cell sites related to the FirstNet Agreement were completed and we expect another 20% of the total build to be completed during the second half of 2022 with the remainder to be completed in early 2023.
Selling, general and administrative expenses. Selling, general and administrative expenses include salaries and benefits we pay to sales personnel, customer service expenses and the costs associated with the development and implementation of our promotional and marketing campaigns. Selling, general and administrative expenses also include salaries, benefits and related costs for general corporate functions including executive management, finance and administration, legal and regulatory, facilities, information technology and human resources as well as internal costs associated with our performance of due-diligence and integration related costs associated with acquisition activities.
Selling, general and administrative expenses increased by $18.5 million, or 45.5%, to $59.2 million from $40.7 million for the three months ended June 30, 2022 and 2021, respectively. The net increase in selling, general and administrative expenses, within our segments, consisted of the following:
| ● | International Telecom. Within our International Telecom segment, our selling, general and administrative expenses increased by $1.8 million, or 7.3%, to $26.3 million from $24.5 million for the three months ended June 30, 2022 and 2021, respectively. This increase was incurred within all of our international markets primarily as a result of an increase in both our sales and marketing efforts and customer support capabilities to support the expansion of our subscriber base. |
| ● | US Telecom. Selling, general and administrative expenses increased within our US Telecom segment by $16.1 million to $24.1 million from $8.0 million, for the three months ended June 30, 2022 and 2021, respectively, primarily as a result of the Alaska Transaction, which generated $17.6 million of these costs during the three months ended June 30, 2022 partially offset by a decrease in spending within our private network business. |
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| ● | Renewable Energy. During the three months ended June 30, 2022 and 2021, our Renewable Energy segment incurred a nominal amount and $0.1 million of selling, general and administrative expenses, respectively. |
| ● | Corporate Overhead. Selling, general and administrative expenses within our corporate overhead increased by $0.6 million, or 7.4%, to $8.7 million from $8.1 million, for the three months ended June 30, 2022 and 2021, respectively, primarily related to increased professional service and travel-related expenses. |
Within both our International and US Telecom segments, we expect that selling, general and administrative expenses may increase if COVID-19 related travel restrictions continue to be lifted. We also expect an increase in 2022 in these costs as a result of expected costs associated with our recent funding award under the CARES Act, our recently received grant to bring fiber connectivity to certain areas in southern Apache County, Arizona and the cost impact of the construction phase of the FirstNet Transaction which is expected to be completed during early 2023. Our Corporate Overhead segment may also experience an increase in these expenses to support our expanding operations. In addition, we expect our selling, general, and administrative expenses may increase as a result of continued inflationary pressure, issues facing the global supply chain and geopolitical uncertainty.
Transaction-related charges. Transaction-related charges include the external costs, such as legal, tax, accounting and consulting fees directly associated with acquisition and disposition-related activities, which are expensed as incurred. Transaction-related charges do not include internal costs, such as employee salary and travel-related expenses, incurred in connection with acquisitions or dispositions or any integration-related costs.
We incurred $0.4 million and $1.4 million of transaction-related charges, primarily related to the Alaska Transaction, during the three months ended June 30, 2022 and 2021, respectively.
Depreciation and amortization expenses. Depreciation and amortization expenses represent the depreciation and amortization charges we record on our property and equipment.
Depreciation and amortization expenses increased by $14.1 million, or 71.6%, to $33.8 million from $19.7 million for the three months ended June 30, 2022 and 2021, respectively. The net increase in depreciation and amortization expenses, within our segments, consisted primarily of the following:
| ● | International Telecom. Depreciation and amortization expenses increased within our International Telecom segment by $1.7 million, or 12.7%, to $15.1 million from $13.4 million, for the three months ended June 30, 2022 and 2021, respectively. This increase was a result of recent upgrades and expansions to this segment’s network. |
| ● | US Telecom. Depreciation and amortization expenses increased within our US Telecom segment by $12.7 million to $17.8 million from $5.1 million, for the three months ended June 30, 2022 and 2021, respectively, primarily as a result of the Alaska Transaction. |
| ● | Corporate Overhead. Depreciation and amortization expenses decreased within our corporate overhead by $0.3 million, or 23.1%, to $1.0 million from $1.3 million, for the three months ended June 30, 2022 and 2021, respectively, primarily as a result of certain assets becoming fully depreciated in recent periods. |
We expect depreciation and amortization expense to increase within all of our segments as we acquire tangible assets to expand or upgrade our telecommunications networks.
Amortization of intangibles from acquisitions. Amortization of intangibles from acquisitions include the amortization of customer relationships and trade names related to our completed acquisitions.
Amortization of intangibles from acquisitions increased by $2.9 million to $3.3 million from $0.4 million for the three months ended June 30, 2022 and 2021, respectively, as a result of the Alaska Transaction.
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Loss on disposition of long-lived assets. During the three months ended June 30, 2022, we recorded a nominal gain on the disposal of certain assets.
During the three months ended June 30, 2021, we recorded a loss on the disposition of long-lived assets of $0.7 million, primarily related to the Vibrant Transaction.
Interest income. Interest income represents interest earned on our cash, cash equivalents, restricted cash and short-term investment balances and were nominal amounts during both the three months ended June 30, 2022 and 2021.
Interest expense. We incur interest expense on the 2019 CoBank Credit Facility, the Alaska Credit Facility (beginning in July 2021), the Viya Debt, the One Communications Debt and the Receivables Credit Facility (each as defined below). Interest expense also includes commitment fees, letter of credit fees and the amortization of debt issuance costs.
Interest expense increased to $4.2 million from $1.1 million for the three months ended June 30, 2022 and 2021, respectively, as additional interest expense was incurred as a result of new borrowings under the 2019 CoBank Credit Facility, the Alaska Credit Facility and the Receivables Credit Facility as well as an increase in interest rates on those facilities.
We expect that interest expense will increase in future periods as a result of an expected increase in both interest rates and borrowings under the 2019 CoBank Credit Facility and the Receivables Credit Facility.
Other income (expenses). Other income (expenses) represents miscellaneous non-operational income earned and expenses incurred.
For the three months ended June 30, 2022, other income (expenses) was $2.7 million of expense primarily related to expenses associated with certain employee benefit plans, losses from our noncontrolling investments and losses on foreign currency transactions.
For the three months ended June 30, 2021, other income (expenses) was an expense of $0.1 million which was primarily related to losses from our noncontrolling investments and on foreign currency transactions. These losses were partially offset by miscellaneous income generated during the quarter.
Income taxes. Our effective tax rate for the three months ended June 30, 2022 and 2021 was 75.2% and (88.2%), respectively.
We recorded an income tax benefit of $4.0 million in relation to a pre-tax loss of $5.3 million for the three months ended June 30, 2022. The effective tax rate for the three months ended June 30, 2022 was primarily impacted by the following items (i) the mix of income generated among the jurisdictions in which we operate and (ii) discrete items including a $3.3 million benefit from the reversal of an unrecognized tax position due to a statute of limitations expiration and a $0.3 million expense for interest on unrecognized tax positions.
The effective tax rate for the three months ended June 30, 2021 was primarily impacted by the following items: (i) the mix of income generated among the jurisdictions in which we operate and (ii) discrete items including a $3.4 million benefit from the reversal of an unrecognized tax position due to a statute of limitations expiration and a $0.5 million expense for interest on unrecognized tax positions.
Our effective tax rate is based upon estimated income before provision for income taxes for the year, composition of the income in different countries, and adjustments, if any, in the applicable quarterly periods for potential tax consequences, benefits and/or resolutions of tax contingencies. Our consolidated tax rate will continue to be impacted by any transactional or onetime items in the future and the mix of income in any given year generated among the jurisdictions in which we operate. While we believe we have adequately provided for all tax positions, amounts asserted by taxing authorities could materially differ from our accrued positions as a result of uncertain and complex applications of tax law and regulations. Additionally, the recognition and measurement of certain tax benefits include
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estimates and judgments by management. Accordingly, we could record additional provisions or benefits for US federal, state, and foreign tax matters in future periods as new information becomes available.
Net income attributable to noncontrolling interests, net of tax. Net income attributable to noncontrolling interests, net of tax reflected an allocation of $0.8 million of losses and $1.3 million of income generated by our less than wholly owned subsidiaries for the three months ended June 30, 2022 and 2021, respectively. Changes in net income attributable to noncontrolling interests, net of tax, within our segments, consisted of the following:
| ● | International Telecom. Within our International Telecom segment, net income attributable to noncontrolling interests, net of tax decreased by $0.9 million, or 50.0%, to an allocation of $0.9 million of income from an allocation of $1.8 million of income for the three months ended June 30, 2022 and 2021, respectively, primarily as a result of reduced profitability at our less than wholly owned subsidiaries partially offset by an increase in our ownership of certain less than wholly owned subsidiaries in certain international markets. |
| ● | US Telecom. Within our US Telecom segment, net income attributable to noncontrolling interests, net of tax decreased by $1.1 million to an allocation of losses of $1.7 million from an allocation of losses of $0.6 million for the three months ended June 30, 2022 and 2021, respectively, as a result of reduced profitability in certain less than wholly owned subsidiaries within our US Mobility operations. |
Net income (loss) attributable to ATN International, Inc. stockholders. Net income (loss) attributable to ATN International, Inc. stockholders was a loss of $0.5 million for the three months ended June 30, 2022 as compared to income of $2.0 million for the three months ended June 30, 2021.
On a per diluted share basis, net income (loss) was a loss of $0.11 per diluted share for the three months ended June 30, 2022 (which includes the impact of accrued preferred dividends of $1.2 million) as compared to income of $0.13 per diluted share for the three months ended June 30, 2021.
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Selected Segment Financial Information
The following represents selected segment information for the six months ended June 30, 2022 and 2021 (in thousands):
For the Six Months Ended June 30, 2022 | |||||||||||||||
|
|
|
|
| |||||||||||
International | US | Renewable | Corporate and | ||||||||||||
Telecom | Telecom | Energy | Other (1) | Consolidated | |||||||||||
Revenue | |||||||||||||||
Communication Services | |||||||||||||||
Mobility - Business | $ | 7,291 | $ | 674 | $ | — | $ | — | $ | 7,965 | |||||
Mobility - Consumer | 41,249 | 3,006 | — | — | 44,255 | ||||||||||
Total Mobility | 48,540 | 3,681 | — | — | 52,220 | ||||||||||
Fixed - Business | 34,250 | 59,011 | — | — | 93,261 | ||||||||||
Fixed - Consumer | 82,446 | 38,136 | — | — | 120,583 | ||||||||||
Total Fixed |
| 116,696 |
| 97,147 |
| — |
| — |
| 213,843 | |||||
Carrier Services | 6,823 | 64,742 | — | — | 71,565 | ||||||||||
Other |
| 710 |
| — |
| — |
| — |
| 710 | |||||
Total Communication Services Revenue | 172,769 | 165,569 | — | — | 338,338 | ||||||||||
Construction | — | 5,283 | — | — | 5,283 | ||||||||||
Other | |||||||||||||||
Renewable Energy | — | — | — | — | — | ||||||||||
Managed Services | 2,422 | 5,474 | — | — | 7,896 | ||||||||||
Total Other Revenue | 2,422 | 5,474 | — | — | 7,896 | ||||||||||
Total Revenue | 175,191 | 176,326 | — | — | 351,517 | ||||||||||
Operating income (loss) |
| 23,450 |
| (4,914) |
| (45) |
| (16,658) |
| 1,833 | |||||
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For the Six Months Ended June 30, 2021 | |||||||||||||||
|
|
|
|
| |||||||||||
International | US | Renewable | Corporate and | ||||||||||||
Telecom | Telecom | Energy | Other (1) | Consolidated | |||||||||||
Revenue | |||||||||||||||
Communication Services | |||||||||||||||
Mobility - Business | $ | 2,495 | $ | 918 | $ | — | $ | — | $ | 3,413 | |||||
Mobility - Consumer | 42,080 | 4,349 | — | — | 46,429 | ||||||||||
Total Mobility | 44,575 | 5,267 | — | — | 49,842 | ||||||||||
Fixed - Business | 33,488 | 4,728 | — | — | 38,216 | ||||||||||
Fixed - Consumer | 84,385 | 7,520 | — | — | 91,905 | ||||||||||
Total Fixed |
| 117,873 |
| 12,248 |
| — |
| — |
| 130,121 | |||||
Carrier Services | 4,406 | 38,774 | — | — | 43,180 | ||||||||||
Other |
| 456 |
| — |
| — |
| — |
| 456 | |||||
Total Communication Services Revenue | 167,310 | 56,289 | — | — | 223,599 | ||||||||||
Construction | — | 21,632 | — | — | 21,632 | ||||||||||
Other | |||||||||||||||
Renewable Energy | — | — | 418 | — | 418 | ||||||||||
Managed Services | 2,726 | — | — | — | 2,726 | ||||||||||
Total Other Revenue | 2,726 | — | 418 | — | 3,144 | ||||||||||
Total Revenue | 170,036 | 77,921 | 418 | — | 248,375 | ||||||||||
Operating income (loss) |
| 27,786 | (1,090) | (1,433) | (19,009) | 6,254 | |||||||||
| (1) | Reconciling items refer to corporate overhead costs and consolidating adjustments |
A comparison of our segment results for the six months ended June 30, 2022, and 2021 is as follows:
International Telecom. Revenues within our International Telecom segment increased $5.2 million, or 3.1%, to $175.2 million from $170.0 million for the six months ended June 30, 2022 and 2021, respectively, as a result of an increase in Fixed and Mobility subscribers within our international markets. In addition, our US Virgin Islands and Bermuda markets recognized an increase in Carrier Services revenue as a result of increased tourism as certain COVID-19 related travel and stay-at-home restrictions were lifted. These increases, however, were partially offset by a $2.7 million reduction in federal support revenues in the US Virgin Islands.
Operating expenses within our International Telecom segment increased by $9.5 million, or 6.7%, to $151.7 million from $142.2 million for the six months ended June 30, 2022 and 2021, respectively. The increase was primarily the result of an increase in direct costs, primarily roaming expenses due to increased tourism in the US Virgin Islands and Bermuda, equipment expenses due to increased handset sales and an increase in sales and marketing expenses to support the expansion of our subscriber base.
As a result, our International Telecom segment’s operating income decreased $4.3 million, or 15.5%, to $23.5 million from $27.8 million for the six months ended June 30, 2022 and 2021, respectively.
US Telecom. Revenue within our US Telecom segment increased by $98.4 million, or 126.3%, to $176.3 million from $77.9 million for the six months ended June 30, 2022 and 2021, respectively, primarily as a result of $120.9 million associated with the Alaska Transaction partially offset by a $16.3 million reduction in construction revenue related to the FirstNet Transaction as well as a reduction in roaming revenue due to the restructuring of certain carrier contracts in our western United States operations.
Operating expenses within our US Telecom segment increased $102.2 million to $181.2 million from $79.0 million for the six months ended June 30, 2022 and 2021, respectively, as a result of the Alaska Transaction and increases in other expenses being incurred in connection with both the FirstNet Transaction and the CARES Act-funded
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build-out of rural broadband operations, partially offset be a decrease in FirstNet construction costs of $16.8 million. In addition, certain costs were incurred during the six months ended June 30, 2022 that were not incurred during the six months ended June 30, 2021 as a result of the impact of COVID-19 restrictions.
As a result of the above, our US Telecom segment’s operating loss increased by $3.8 million to a loss of $4.9 million from a loss of $1.1 million for the six months ended June 30, 2022 and 2021, respectively.
Renewable Energy. Until the completion of the Vibrant Transaction on January 27, 2021, we distributed generation solar power to commercial and industrial customers under the Vibrant name in India. Accordingly, we did not generate revenue or incur operating expenses within our Renewable Energy segment subsequent to that date. For the six months ended June 30, 2021, we generated revenue, incurred operating expenses and reported an operating loss of $0.4 million, $1.1 million and $0.7 million, respectively.
The following represents a year over year discussion and analysis of our results of operations for the six months ended June 30, 2022 and 2021 (in thousands):
Six Months Ended | Amount of | Percent |
| |||||||||
June 30, | Increase | Increase |
| |||||||||
2022 | 2021 | (Decrease) | (Decrease) |
| ||||||||
| ||||||||||||
REVENUE: |
|
|
|
|
|
|
| |||||
Communication services | $ | 338,338 | $ | 223,599 | $ | 114,739 |
| 51.3 | % | |||
Construction | 5,283 | 21,632 | (16,349) |
| (75.6) | |||||||
Other |
| 7,896 |
| 3,144 |
| 4,752 |
| 151.1 | ||||
Total revenue | 351,517 | 248,375 | 103,142 |
| 41.5 | |||||||
OPERATING EXPENSES (excluding depreciation and amortization unless otherwise indicated): | ||||||||||||
Cost of communication services and other | 150,871 | 97,986 | 52,885 |
| 54.0 | |||||||
Cost of construction revenue | 5,319 | 22,142 | (16,823) | (76.0) | ||||||||
Selling, general and administrative | 115,519 | 78,344 | 37,175 |
| 47.5 | |||||||
Transaction-related charges | 966 | 2,126 | (1,160) |
| (54.6) | |||||||
Depreciation and amortization | 67,109 | 39,849 | 27,260 |
| 68.4 | |||||||
Amortization of intangibles from acquisitions | 6,508 | 813 | 5,695 |
| n/m | |||||||
Loss on disposition of long-lived assets | 3,392 | 861 | 2,531 |
| 294.0 | |||||||
Total operating expenses | 349,684 | 242,121 | 107,563 |
| 44.4 | |||||||
Income (loss) from operations | 1,833 | 6,254 | (4,421) |
| (70.7) | |||||||
OTHER INCOME (EXPENSE): | ||||||||||||
Interest income | 3 | 40 | (37) |
| (92.5) | |||||||
Interest expense | (7,593) | (2,285) | (5,308) |
| 232.3 | |||||||
Other income (expense) | 1,474 | 2,309 | (835) |
| (36.2) | |||||||
Other income (expense), net | (6,116) | 64 | (6,180) |
| n/m | |||||||
INCOME (LOSS) BEFORE INCOME TAXES |
| (4,283) |
| 6,318 |
| (10,601) |
| (168) | ||||
Income tax provision (benefit) |
| (1,018) |
| (1,247) |
| 229 |
| (18.4) | ||||
NET LOSS |
| (3,265) |
| 7,565 |
| (10,830) |
| (143.2) | ||||
Net income attributable to noncontrolling interests, net of tax: |
| 1,794 |
| (2,842) |
| 4,636 |
| (163.1) | ||||
NET LOSS ATTRIBUTABLE TO ATN INTERNATIONAL, INC. STOCKHOLDERS | $ | (1,471) | $ | 4,723 | $ | (6,194) |
| (131.1) | % | |||
n/m = not meaningful
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Communications Services Revenue
Mobility Revenue. Mobility revenue increased by $2.4 million, or 4.8%, to $52.2 million for the six months ended June 30, 2022 from $49.8 million for the six months ended June 30, 2021. Of this increase, $4.6 million related to an increase in revenue from business customers while revenue from consumers declined by $2.2 million. The increase in Mobility revenue, within our segments, consisted of the following:
| ● | International Telecom. Within our International Telecom segment, Mobility revenue increased by $3.9 million, or 8.7%, to $48.5 million for the six months ended June 30, 2022 from $44.6 million for the six months ended June 30, 2021. Mobility revenue increased in each of our markets as total revenue from business customers increased by $4.8 million which was partially offset by a decline of $0.8 million in revenue from consumers. The increases were the result of improved retail and marketing strategies which lead to an increase in subscribers and equipment sales in certain markets. |
| ● | US Telecom. Mobility revenue within our US Telecom segment decreased by $1.6 million, or 30.2%, to $3.7 million from $5.3 million for the six months ended June 30, 2022 and 2021, respectively. Of this decrease, $1.3 million related to a decrease in revenue from consumers within our retail operations due to a decrease in subscribers while the remaining $0.2 million decrease was the result of a decrease in revenue from our private networks business. |
Fixed Revenue. Fixed revenue increased by $83.7 million, or 64.3%, to $213.8 million from $130.1 million for the six months ended June 30, 2022 and 2021, respectively. Of this increase, $55.0 million and $28.7 million relate to revenue from business and consumer customers, respectively. The increase in Fixed revenue, within our segments, consisted of the following:
| ● | International Telecom. Within our International Telecom segment, Fixed revenue decreased by $1.2 million, or 1.0%, to $116.7 million from $117.9 million for the six months ended June 30, 2022 and 2021, respectively, primarily as a result of the previously disclosed and scheduled $2.7 million reduction in revenue from the FCC’s High Cost Program. Partially offsetting these decreases was an increase in revenue from fixed broadband fiber subscribers and services to further enable and support remote working in our markets. |
| ● | US Telecom. Fixed revenue within our US Telecom segment increased by $84.9 million, to $97.1 million from $12.2 million for the six months ended June 30, 2022 and 2021, respectively. This increase was related to the Alaska Transaction, which generated $83.5 million of Fixed revenue during the six months ended June 30, 2022, and a $1.4 million increase, within the western United States, related to an increase in usage for both business and consumer subscribers to support increased remote working. |
Carrier Services Revenue. Carrier Services revenue increased by $28.4 million, or 65.7%, to $71.6 million from $43.2 million for the six months ended June 30, 2022 and 2021, respectively. The increase, within our segments, consisted of the following:
| ● | International Telecom. Within our International Telecom segment, Carrier Services revenue increased by $2.4 million, or 54.5%, to $6.8 million, from $4.4 million for the six months ended June 30, 2022 and 2021, respectively, as a result of an increase in tourism, primarily within the US Virgin Islands and Bermuda, that resulted in increased roaming revenues. |
| ● | US Telecom. Carrier Services revenue within our US Telecom segment increased by $25.9 million, or 66.8%, to $64.7 million from $38.8 million, for the six months ended June 30, 2022 and 2021, respectively, primarily as a result of the Alaska Transaction, which generated $31.9 million of Carrier Services revenue during the six months ended June 30, 2022 and a $0.9 million increase in revenue from our wholesale long-distance business. These increases were partially offset by the revenue reductions in our western United States operations as a result of the restructure of certain carrier contracts. |
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Other Communications Services Revenue. Other Communications Services revenue increased to $0.7 million from $0.5 million for the six months ended June 30, 2022 and 2021, respectively.
Construction Revenue
During the six months ended June 30, 2022 and 2021, Construction revenue decreased to $5.3 million from $21.6 million, respectively, as a result of a decrease in the number of sites completed during 2022 as compared to 2021. As of June 30, 2022, 65% of the cell sites related to the FirstNet Agreement were completed and we expect another 20% of the total build to be completed during the second half 2022 with the remainder to be completed in early 2023.
Other Revenue
Renewable Energy Revenue. As a result of the Vibrant Transaction, we did not generate any renewable energy revenue during the six months ended June 30, 2022 and generated $0.4 million of renewable energy revenue during the six months ended June 30, 2021.
Managed Services Revenue. Managed Services revenue increased by $5.2 million to $7.9 million from $2.7 million for the six months ended June 30, 2022 and 2021, respectively, as a result of the Alaska Transaction, which generated $5.5 million during the six months ended June 30, 2022. Our Managed Services revenue in our International Telecom segment decreased $0.3 million, or 11.1%, to $2.4 million from $2.7 million for the six months ended June 30, 2022 and 2021, respectively.
Operating Expenses
Cost of communication services and other. Cost of communication services and other increased by $52.9 million, or 54.0%, to $150.9 million from $98.0 million for the six months ended June 30, 2022 and 2021, respectively. The net increase in cost of communication services and other, within our segments, consisted of the following:
| ● | International Telecom. Within our International Telecom segment, cost of communication services and other increased by $1.4 million, or 2.1%, to $69.1 million from $67.7 million, for the six months ended June 30, 2022 and 2021, respectively. This increase was the result of an increase in roaming expense, due to an increase in related roaming revenues from higher levels of travel and tourism in the US Virgin Islands and Bermuda, as well as an increase in equipment expense as a result of improved retail and marketing strategies which lead to an increase in handset sales. These increases were partially offset by reduced network maintenance and facility costs |
| ● | US Telecom. Cost of communication services and other within our US Telecom segment increased by $51.7 million, or 168.4%, to $82.4 million from $30.7 million for the six months ended June 30, 2022 and 2021, respectively, as a result of the Alaska Transaction which incurred $50.8 million of these costs during the six months ended June 30, 2022, a $1.1 million increase in data transport costs in connection with the fully constructed cell sites as part of the FirstNet Transaction and a $1.1 million increase within our wholesale long-distance voice services business to support its increase in revenues. These increases were partially offset by decreases in our private network business. |
Cost of construction revenue. During the six months ended June 30, 2022 and June 30, 2021, cost of construction revenue decreased to $5.3 million from $22.1 million as a result of a decrease in the number of sites completed during 2022 as compared to 2021. As of June 30, 2022, 65% of the cell sites related to the FirstNet Agreement were completed and we expect another 20% of the total build to be completed during the second half of 2022 with the remainder to be completed in early 2023.
Selling, general and administrative expenses. Selling, general and administrative expenses increased by $37.2 million, or 47.5%, to $115.5 million from $78.3 million for the six months ended June 30, 2022 and 2021, respectively. The net increase in selling, general and administrative expenses, within our segments, consisted of the following:
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| ● | International Telecom. Within our International Telecom segment, our selling, general and administrative expenses increased by $4.9 million, or 10.4%, to $51.9 million from $47.0 million for the six months ended June 30, 2022 and 2021, respectively. This increase was incurred within all of our international markets primarily as a result of an increase in our sales and marketing capabilities to support the expansion of our subscriber base. |
| ● | US Telecom. Selling, general and administrative expenses increased within our US Telecom segment by $32.4 million to $48.3 million from $15.9 million, for the six months ended June 30, 2022 and 2021, respectively, primarily as a result of the Alaska Transaction, which generated $35.5 million of these costs during the six months ended June 30, 2022 partially offset by a decrease in spending within our private network business. |
| ● | Renewable Energy. During the six months ended June 30, 2022 and 2021, our Renewable Energy segment incurred a nominal amount and $0.4 million of selling, general and administrative expenses, respectively, as a result of the Vibrant Transaction. |
| ● | Corporate Overhead. Selling, general and administrative expenses within our corporate overhead increased by $0.3 million, or 2.0%, to $15.3 million from $15.0 million, for the six months ended June 30, 2022 and 2021, respectively, primarily related to an increase in professional service expenses, integration costs associated with the completion of the Alaska Transaction and an increase in travel related costs. |
Transaction-related charges. We incurred $1.0 million and $2.1 million of transaction-related charges during the six months ended June 30, 2022 and 2021, respectively. Transaction-related charges incurred during both periods were primarily related to the Alaska Transaction.
Depreciation and amortization expenses. Depreciation and amortization expenses increased by $27.3 million, or 68.6%, to $67.1 million from $39.8 million for the six months ended June 30, 2022 and 2021, respectively. The net increase in depreciation and amortization expenses, within our segments, consisted primarily of the following:
| ● | International Telecom. Depreciation and amortization expenses increased within our International Telecom segment by $2.2 million, or 8.2%, to $29.0 million from $26.8 million, for the six months ended June 30, 2022 and 2021, respectively. This increase was a result of recent upgrades and expansions to this segment’s network. |
| ● | US Telecom. Depreciation and amortization expenses increased within our US Telecom segment by $25.9 million to $36.2 million from $10.3 million, for the six months ended June 30, 2022 and 2021, respectively, primarily as a result of the Alaska Transaction. |
| ● | Renewable Energy. Our Renewable Energy segment incurred $0.2 million of depreciation and amortization expenses during the six months ended June 30, 2021. |
| ● | Corporate Overhead. Depreciation and amortization expenses decreased within our corporate overhead by $0.7 million, or 26.9%, to $1.9 million from $2.6 million, for the six months ended June 30, 2022 and 2021, respectively, primarily as a result of certain assets becoming fully depreciated in recent periods. |
Amortization of intangibles from acquisitions. Amortization of intangibles from acquisitions increased by $5.7 million to $6.5 million from $0.8 million for the six months ended June 30, 2022 and 2021, respectively, as a result of the Alaska Transaction.
Loss on disposition of long-lived assets. During the six months ended June 30, 2022, we recorded a loss on the disposition of long-lived assets of $3.4 million. Of this amount, $2.4 million was incurred in our US Telecom segment relating to the disposal of certain assets while $1.0 million was incurred in our International Telecom segment as a result of the modification of agreements for the use of other certain assets.
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During the six months ended June 30, 2021, we recorded a loss on the disposition of long-lived assets of $0.9 million, primarily related to the Vibrant Transaction.
Interest income. Interest income represents interest earned on our cash, cash equivalents, restricted cash and short-term investment balances and were nominal amounts during both the six months ended June 30, 2022 and 2021.
Interest expense. Interest expense increased to $7.6 million from $2.3 million for the six months ended June 30, 2022 and 2021, respectively, as additional interest expense was incurred as a result of new borrowings under the 2019 CoBank Credit Facility, the Alaska Credit Facility and the Receivables Credit Facility as well as an increase in interest rates.
Other income (expenses). For the six months ended June 30, 2022, other income (expenses) was $1.5 million of income primarily related to gains from our noncontrolling investments partially offset by increased expenses associated with certain employee benefit plans and losses on foreign currency transactions.
For the six months ended June 30, 2021, other income (expense) was income of $2.3 million which was primarily related to gains from our noncontrolling investments partially offset by a net loss on foreign currency transactions.
Income taxes. Our effective tax rate for the six months ended June 30, 2022 and 2021 was 23.8% and (19.7%), respectively.
We recorded an income tax benefit of $1.0 million in relation to a pretax loss of $4.3 million for the six months ended June 30, 2022. The effective tax rate for the six months ended June 30, 2022 was primarily impacted by the following items (i) the mix of income generated among the jurisdictions in which we operate, (ii) a $2.1 million net expense recognized discretely to record a valuation allowance on certain deferred tax assets that are not expected to be realizable based on the weight of positive and negative evidence and (iii) discrete items including a $3.3 million benefit from the reversal of an unrecognized tax position due to a statute of limitations expiration, and a $0.8 million expense for interest on unrecognized tax positions.
The effective tax rate for the six months ended June 30, 2021 was primarily impacted by the following items: (i) the mix of income generated among the jurisdictions in which we operate and (ii) discrete items including a $3.4 million benefit from the reversal of an unrecognized tax position due to a statute of limitations expiration and a $1.0 million expense for interest on unrecognized tax positions.
Our effective tax rate is based upon estimated income before provision for income taxes for the year, composition of the income in different countries, and adjustments, if any, in the applicable quarterly periods for potential tax consequences, benefits and/or resolutions of tax contingencies. Our consolidated tax rate will continue to be impacted by any transactional or onetime items in the future and the mix of income in any given year generated among the jurisdictions in which we operate. While we believe we have adequately provided for all tax positions, amounts asserted by taxing authorities could materially differ from our accrued positions as a result of uncertain and complex applications of tax law and regulations. Additionally, the recognition and measurement of certain tax benefits include estimates and judgments by management. Accordingly, we could record additional provisions or benefits for US federal, state, and foreign tax matters in future periods as new information becomes available.
Net income attributable to noncontrolling interests, net of tax. Net income attributable to noncontrolling interests, net of tax reflected an allocation of $1.8 million of losses and $2.8 million of income generated by our less than wholly owned subsidiaries for the six months ended June 30, 2022 and 2021, respectively. Changes in net income attributable to noncontrolling interests, net of tax, within our segments, consisted of the following:
| ● | International Telecom. Within our International Telecom segment, net income attributable to noncontrolling interests, net of tax decreased by $1.1 million, or 31.4%, to an allocation of $2.4 million of income from an allocation of $3.5 million of income for the six months ended June 30, 2022 and 2021, respectively, primarily |
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| as a result of reduced profitability at our less than wholly owned subsidiaries partially offset by an increase in our ownership in certain international markets. |
| ● | US Telecom. Within our US Telecom segment, net income attributable to noncontrolling interests, net of tax decreased by $4.3 million to an allocation of losses of $4.2 million from an allocation of income of $0.1 million for the six months ended June 30, 2022 and 2021, respectively, as a result of the Alaska Transaction and reduced profitability in certain less than wholly owned subsidiaries within our US Mobility operations. |
Net income (loss) attributable to ATN International, Inc. stockholders. Net income (loss) attributable to ATN International, Inc. stockholders was a loss of $1.5 million for the six months ended June 30, 2022 as compared to income of $4.7 million for the six months ended June 30, 2021.
On a per diluted share basis, net income (loss) was a loss of $0.24 per diluted share for the six months ended June 30, 2022 (which includes the impact of accrued preferred dividends of $2.3 million) as compared to income of $0.30 per diluted share for the six months ended June 30, 2021.
Regulatory and Tax Issues
We are involved in a number of regulatory and tax proceedings. A material and adverse outcome in one or more of these proceedings could have a material adverse impact on our financial condition and future operations. For a discussion of ongoing proceedings, see Note 14 to the Consolidated Financial Statements in this Report.
Tax Reform
The Tax Cuts and Jobs Act of 2017 (the “Tax Act”), which was signed into law on December 22, 2017, has resulted in significant changes to the US corporate income tax system and the US Virgin Islands mirror code which replaces “United States” with “US Virgin Islands” throughout the Internal Revenue Code. The Tax Act transitions international taxation from a worldwide system to a modified territorial system and includes two base erosion prevention measures on non-US earnings, which has the effect of subjecting certain earnings of our foreign subsidiaries to US taxation as global intangible low taxed income (“GILTI”), eliminates the deduction of certain payments made to related foreign corporations, and imposes a minimum tax if greater than regular tax under the base-erosion and anti-abuse tax (“BEAT”). These changes became effective beginning in 2018 but did not have an impact on us in the initial or following years. Based on our forecasted income for 2022, we are not currently projecting a GILTI inclusion. We do not expect we will be subject to BEAT and therefore have not included any tax impacts of BEAT in our consolidated financial statements for the quarter ended June 30, 2022.
Liquidity and Capital Resources
Historically, we have met our operational liquidity needs and have funded our capital expenditures and acquisitions through a combination of cash-on-hand, internally generated funds, proceeds from dispositions, borrowings under our credit facilities and seller financings. We believe our current cash, cash equivalents, short term investments and availability under our current credit facilities will be sufficient to meet our cash needs for at least the next twelve months for working capital needs and capital expenditures.
Total liquidity. As of June 30, 2022, we had approximately $72.2 million in cash, cash equivalents and restricted cash. Of this amount, $25.5 million was held by our foreign subsidiaries and is indefinitely invested outside the United States. In addition, we had approximately $396.6 million of debt, net of unamortized deferred financing costs, as of June 30, 2022. How and when we deploy our balance sheet capacity will figure prominently in our longer-term growth prospects and stockholder returns.
Uses of Cash
Acquisitions and investments. We have historically funded our acquisitions with a combination of cash-on-hand, borrowings under our credit facilities as well as equity investor and seller financings.
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Alaska Transaction. On July 22, 2021, Alaska Communications entered into a new debt financing in connection with the Alaska Transaction. See Acquisition of Alaska Communications System Group, Inc.
We continue to explore opportunities to expand our telecommunications business or acquire new businesses and telecommunications licenses in the United States, the Caribbean and elsewhere. Such acquisitions may require external financing. While there can be no assurance as to whether, when or on what terms we will be able to acquire any such businesses or licenses or make such investments, such acquisitions may be completed through the issuance of shares of our capital stock, payment of cash or incurrence of additional debt. From time to time, we may raise capital ahead of any definitive use of proceeds to allow us to move more quickly and opportunistically if an attractive investment materializes.
Cash used in investing activities. Cash used in investing activities increased by $49.4 million to $74.7 million from $25.3 million for the six months ended June 30, 2022 and 2021, respectively. Capital expenditures for the six months ended June 30, 2022 and 2021 were $75.1 million and $41.9 million, respectively. Of these capital expenditure amounts, $3.9 million and $6.5 million for the six months ended June 30, 2022 and 2021, respectively, are reimbursable. We also incurred expenditures of $1.4 million and $5.2 million during the six months ended June 30, 2022 and 2021, respectively, for strategic investments. Partially offsetting these expenditures were cash receipts of $1.8 million and $18.6 million during the six months ended June 30, 2022 and 2021, respectively, for the proceeds from the Vibrant Transaction and a receipt of $3.3 million during the six months ended June 30, 2021 for certain government grants.
Cash provided by (used in) financing activities. Our financing activities provided us with $15.4 million during the six months ended June 30, 2022. For the six months ended June 30, 2021, we used $11.2 million for our financing activities. The net change of $26.6 million was primarily a result of an increase in borrowings from our credit facilities of $39.4 million partially offset by the increase in our repayments under those facilities of $25.4 million. Other significant changes in financing activities included the decreases in payments made for the repurchase of noncontrolling interests in our less than wholly-owned subsidiaries, distributions made to the minority stockholders of our less than wholly-owned subsidiaries and the repurchase of our common stock of $8.2 million, $3.1 million and $1.3 million, respectively.
Working Capital. Historically, we have internally funded our working capital needs. Pursuant to the FirstNet Agreement, ATT has the option to repay construction costs, with interest, over an eight-year period. To fund the working capital needs created by ATT’s option to extend its payment terms, we completed the Receivables Credit Facility, as discussed below, on March 26, 2020.
Capital expenditures. Historically, a significant use of our cash has been for capital expenditures to expand and upgrade our telecommunications networks and to expand our previously owned renewable energy operations.
For the six months ended June 30, 2022 and 2021, we spent approximately $75.1 million and $41.9 million, respectively, on capital expenditures relating to our telecommunications networks and our business support systems of which $3.9 million and $6.5 million, respectively, are reimbursable. The following notes our capital expenditures, by operating segment, for these periods (in thousands):
Capital Expenditures | ||||||||||||
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International | US | Corporate and | ||||||||||
Six months ended June 30, | Telecom | Telecom | Other (1) | Consolidated | ||||||||
2022 | $ | 33,870 | $ | 40,804 | $ | 424 | $ | 75,098 | ||||
2021 | 21,843 | 18,792 | 1,297 | 41,932 | ||||||||
| (1) | Corporate and other items refer to corporate overhead costs and consolidating adjustments |
We are continuing to invest in our telecommunication networks along with our operating and business support systems in many of our markets. Such investments primarily relate to the upgrade and expansion of our networks and are expected to total approximately $150 million to $160 million, net of reimbursable amounts, for the full year 2022.
We expect to fund our current capital expenditures primarily from our current cash balances, cash generated from operations and our existing credit facilities including the Receivables Credit Facility.
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Income taxes. We have historically used cash-on-hand to make payments for income taxes. Our policy is to allocate capital where we believe we will get the best returns and to date has been to indefinitely reinvest the undistributed earnings of our foreign subsidiaries. As we continue to reinvest our remaining foreign earnings, no additional provision for income taxes has been made on accumulated earnings of foreign subsidiaries.
Dividends. We use cash-on-hand to make dividend payments to our stockholders when declared by our Board of Directors. For the six months ended June 30, 2022, our Board of Directors declared $5.4 million of dividends to our stockholders which includes a $0.17 per share dividend declared on June 13, 2022 and paid on July 8, 2022. We have declared quarterly dividends since the fourth quarter of 1998.
Stock Repurchase Plan. On September 19, 2016, our Board of Directors authorized the repurchase of up to $50.0 million of our common stock from time to time on the open market or in privately negotiated transactions (the “2016 Repurchase Plan”). We repurchased $0.9 million and $2.2 million of our common stock under the 2016 Repurchase Plan during the six months ended June 30, 2022 and 2021, respectively. As of June 30, 2022, we had $19.5 million authorized and available for share repurchases under the 2016 Repurchase Plan.
Sources of Cash
Cash provided by operations. Cash provided by operating activities was $50.7 million for the six months ended June 30, 2022 as compared to $27.5 million for the six months ended June 30, 2021. The increase of $23.2 million was primarily related to a decrease in net income of $10.8 million offset by an increase in depreciation and amortization expenses of $33.0 million.
CoBank Credit Facility
On April 10, 2019, we entered into a credit facility, with CoBank, ACB and a syndicate of other lenders (the “2019 CoBank Credit Facility”). The 2019 CoBank Credit Facility provides for a $200 million revolving credit facility that includes (i) up to $75 million for standby or trade letters of credit and (ii) up to $10 million under a swingline sub-facility. Approximately $26.0 million of performance letters of credit have been issued and remain outstanding and undrawn as of June 30, 2022. The 2019 CoBank Credit Facility matures on April 10, 2024.
Amounts borrowed under the 2019 CoBank Credit Facility bear interest at a rate equal to, at our option, either (i) the London Interbank Offered Rate (“LIBOR”) plus an applicable margin ranging between 1.25% to 2.25% or (ii) a base rate plus an applicable margin ranging from 0.25% to 1.25%. Swingline loans bear interest at the base rate plus the applicable margin for base rate loans. The base rate is equal to the higher of (i) 1.00% plus the higher of (x) LIBOR for an interest period of one month and (y) LIBOR for an interest period of one week; (ii) the Federal Funds Effective Rate (as defined in the 2019 CoBank Credit Facility) plus 0.50% per annum; and (iii) the Prime Rate (as defined in the 2019 CoBank Credit Facility). The applicable margin is determined based on the Total Net Leverage Ratio (as defined in the 2019 CoBank Credit Facility). Under the terms of the 2019 CoBank Credit Facility, we must also pay a fee ranging from 0.150% to 0.375% of the average daily unused portion of the 2019 CoBank Credit Facility over each calendar quarter.
The 2019 CoBank Credit Facility contains customary representations, warranties and covenants, including a financial covenant that imposes a maximum ratio of indebtedness to EBITDA as well as covenants limiting additional indebtedness, liens, guaranties, mergers and consolidations, substantial asset sales, investments and loans, sale and leasebacks, transactions with affiliates and fundamental changes. Our investments in “unrestricted” subsidiaries and certain dividend payments to our stockholders are not limited unless the Total Net Leverage Ratio is equal to or greater than 1.75 to 1.0. The Total Net Leverage Ratio is measured each fiscal quarter and is required to be less than or equal to 2.75 to 1.0. In the event of a Qualifying Acquisition (as defined in the 2019 CoBank Credit Facility), the Total Net Leverage Ratio increases to 3.25 to 1.0 for the subsequent three fiscal quarters.
The 2019 CoBank Credit Facility also provides for the incurrence by us of incremental term loan facilities, when combined with increases to revolving loan commitments, in an aggregate amount not to exceed $200 million (the
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“Accordion”). Amounts borrowed under the Accordion are also subject to proforma compliance with a net leverage ratio financial covenant.
As of June 30, 2022, we were in compliance with all of the financial covenants, had $78.0 million outstanding in borrowings and, net of the $26.0 million of outstanding performance letters of credit, had $96.0 million of availability under the 2019 CoBank Credit Facility.
Alaska Credit Facility
On July 22, 2021, Alaska Communications entered into a Credit Agreement (the “Alaska Credit Facility”) with Fifth Third Bank, National Association, as Administrative Agent, and a syndicate of lenders to provide a $35.0 million revolving facility (the “Alaska Revolving Facility”) and a $210.0 million initial term loan facility (the “Alaska Term Loan”). As of June 30, 2022, $210.0 million was outstanding under the Alaska Term Loan and $10.0 million was outstanding under the Alaska Revolving Facility. Both facilities mature on July 22, 2026.
We capitalized $6.6 million of fees associated with the Alaska Credit Facility which are being amortized over the life of the debt and $5.6 million were unamortized as of June 30, 2022.
The Alaska Credit Facility also provides for incremental term loans up to an aggregate principal amount of the greater of $70.0 million and Alaska Communications’ trailing twelve-month Consolidated EBITDA (as defined in the Alaska Credit Facility).
The key terms and conditions of the Alaska Credit Facility include the following:
| ● | Amounts outstanding bear an interest rate of LIBOR, or a LIBOR replacement rate as applicable, plus a margin ranging from 3.00% to 4.00% based on Alaska Communications’ Consolidated Total Net Leverage Ratio (as defined in the Credit Agreement) or an alternate base rate may be selected at a margin that is 1% lower than the counterpart LIBOR margin; |
| ● | Principal repayments are due quarterly commencing in the fourth quarter of 2023 in quarterly amounts as follows: from the fourth quarter of 2023 through the third quarter of 2024, $1.3 million; and from the fourth quarter of 2024 through the third quarter of 2026, $2.6 million. The remaining unpaid balance is due on the final maturity date; |
| ● | Alaska Communications is required to maintain financial ratios as defined in the Alaska Credit Facility, including (a) a maximum Consolidated Net Total Leverage Ratio of 4.00 to 1, stepping down to 3.75 to 1 beginning with the second quarter of 2024; and (b) a minimum Consolidated Fixed Charge Coverage Ratio of not less than 1.25 to 1; and |
| ● | The Alaska Credit Facility is non-recourse to the Company and is secured by substantially all of the personal property and certain material real property owned by Alaska Communications. |
Alaska Communication’s interest rate swap, which had been designated as a cash flow hedge with an interest rate of 1.6735%, expired on June 30, 2022.
FirstNet Receivables Credit Facility
On March 26, 2020, Commnet Finance, a wholly owned subsidiary of Commnet Wireless, entered into a receivables credit facility with the Company, Commnet Wireless, and CoBank, ACB (the “Receivables Credit Facility”).
The Receivables Credit Facility provides for a senior secured delayed draw term loan in an aggregate principal amount of up to $75.0 million and the proceeds may be used to acquire certain receivables from Commnet Wireless. The receivables to be financed and sold under the Receivables Credit Facility, which provide the loan
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security, relate to the obligations of ATT under the FirstNet Agreement. On December 29, 2021, CoBank amended the Receivables Credit Facility and extended the delayed draw period to December 31, 2022.
The maturity date for each loan will be set by CoBank and will match the weighted average maturity of the certain receivables financed.
Interest on the loans accrues at a fixed annual interest rate to be quoted by CoBank.
The Receivables Credit Facility contains customary events of termination, representations and warranties, affirmative and negative covenants and events of default customary for facilities of this type.
As of June 30, 2022, we had $41.3 million outstanding, of which $5.3 million was current, and $29.7 million of availability under the Receivables Credit Facility. We capitalized $0.9 million of fees associated with the Receivables Credit Facility which are being amortized over the life of the debt and $0.7 million were unamortized as of June 30, 2022.
Viya Debt
We, and certain of our subsidiaries, have entered into a $60.0 million loan agreement (the “Viya Debt”) with Rural Telephone Finance Cooperative (“RTFC”). The Viya Debt agreement contains customary representations, warranties and affirmative and negative covenants (including limitations on additional debt, guaranties, sale of assets and liens) and a financial covenant that limits the maximum ratio of indebtedness to annual operating cash flow to 3.5 to 1.0 (the “Net Leverage Ratio”). This covenant is tested on an annual basis at the end of each fiscal year. Interest is paid quarterly at a fixed rate of 4.0% per annum and principal repayment is not required until maturity on July 1, 2026. Prepayment of the Viya Debt may be subject to a fee under certain circumstances. The debt is secured by certain assets of our Viya subsidiaries and is guaranteed by us.
We paid a fee of $0.9 million in 2016 to lock the interest rate at 4% per annum over the term of the Viya Debt. The fee was recorded as a reduction to the Viya Debt carrying amount and is being amortized over the life of the loan.
As of June 30, 2022, $60.0 million of the Viya Debt remained outstanding and $0.4 million of the rate lock fee was unamortized.
On May 5, 2022, RTFC agreed to amend the Net Leverage Ratio to 7.0 to 1.0 through the maturity date of July 1, 2026. This covenant will be tested on December 31, 2022.
One Communications Debt
We have an outstanding loan from HSBC Bank Bermuda Limited (the “One Communications Debt”) which is scheduled to mature on August 31, 2022 and bears interest at the one-month LIBOR plus a margin ranging between 2.5% to 2.75% per annum paid quarterly.
The One Communications Debt contains customary representations, warranties and affirmative and negative covenants (including limitations on additional debt, guaranties, sale of assets and liens) and financial covenants, tested annually as of and for the twelve months ended December 31st, that limit the ratio of tangible net worth to long term debt and total net debt to EBITDA and require a minimum debt service coverage ratio (as defined in the One Communications Debt agreement).
As of June 30, 2022, $3.8 million of the One Communications Debt was outstanding.
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Factors Affecting Sources of Liquidity
Internally generated funds. The key factors affecting our internally generated funds are demand for our services, competition, regulatory developments, economic conditions in the markets where we operate our businesses and industry trends within the telecommunications and renewable energy industries.
Restrictions under Credit Facility. Our 2019 CoBank Credit Facility contains customary representations, warranties and covenants, including covenants limiting additional indebtedness, liens, guaranties, mergers and consolidations, substantial asset sales, investments and loans, sale and leasebacks, transactions with affiliates and fundamental changes.
In addition, the 2019 CoBank Credit Facility contains a financial covenant that imposes a maximum ratio of indebtedness to EBITDA. As of June 30, 2022, we were in compliance with all of the financial covenants of the 2019 CoBank Credit Facility.
Capital markets. Our ability to raise funds in the capital markets depends on, among other things, general economic conditions, the conditions of the telecommunications and renewable energy industries, our financial performance, the state of the capital markets and our compliance with SEC requirements for the offering of securities.
Foreign Currency
We translate the assets and liabilities of our foreign subsidiaries from their respective functional currencies, primarily the Guyana Dollar, to US Dollars at the appropriate rates as of the balance sheet date. Changes in the carrying value of these assets and liabilities attributable to fluctuations in rates are recognized in foreign currency translation adjustment, a component of accumulated other comprehensive income on our balance sheet. Income statement accounts are translated using the monthly average exchange rates during the year. Monetary assets and liabilities denominated in a currency that is different from a reporting entity’s functional currency must first be remeasured from the applicable currency to the legal entity’s functional currency. The effect of this remeasurement process is reported in other income within our income statement. During the three months ended June 30, 2022 and 2021, we recorded $0.2 million and $0.3 million, respectively, in losses on foreign currency transactions. During each of the six months ended June 30, 2022 and 2021, we recorded $0.4 million in losses on foreign currency transactions. We will continue to assess the impact of our exposure to the Guyana Dollar.
Inflation
Several of our markets have experienced increases in operating costs, some of which we believe, are attributable to inflation. If inflation continues or worsens, it could negatively impact our Company by increasing our operating expenses. Inflation may lead to cost increases in multiple areas across our business, for example, rises in the prices of raw materials and manufactured goods, increased energy rates, as well as increased wage pressures and other expenses related to our employees. In particular, where we have agreed to undertake infrastructure build outs on a fixed budget for our carrier customers or by accepting government grants, inflation may result in build costs that exceed our original budget given the long delays experienced in procuring equipment and materials due to global supply chain delays. To the extent that we are unable to pass on these costs through increased prices, revised budget estimates, or offset them in other ways, they may impact our financial condition and cash flows.
Recent Accounting Pronouncements
See Note 2 to the Unaudited Condensed Consolidated Financial Statements included in this Report.
Critical Accounting Estimates
There were no changes to critical accounting estimates from those disclosed in “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates” of our Annual Report on Form 10-K for the year ended December 31, 2021.
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Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Translation and Remeasurement. We translate the assets and liabilities of our foreign subsidiaries from their respective functional currencies, primarily the Guyana Dollar, to US Dollars at the appropriate rates as of the balance sheet date. Changes in the carrying value of these assets and liabilities attributable to fluctuations in rates are recognized in foreign currency translation adjustment, a component of accumulated other comprehensive income on our balance sheet. Income statement accounts are translated using the monthly average exchange rates during the year.
Monetary assets and liabilities denominated in a currency that is different from a reporting entity’s functional currency must first be remeasured from the applicable currency to the legal entity’s functional currency. The effect of this remeasurement process is reported in other income on our income statement.
Employee Benefit Plans. We sponsor pension and other postretirement benefit plans for employees of certain subsidiaries. Net periodic pension expense is recognized in our income statement. We recognize a pension or other postretirement plan’s funded status as either an asset or liability in our consolidated balance sheet. Actuarial gains and losses are reported as a component of other comprehensive income and amortized through other income in subsequent periods.
As of June 30, 2022, we had $301.8 million of outstanding variable rate debt which is subject to fluctuations in interest rates. We believe that a 100-basis-point change in interest rates would result in a $3.1 million change in our annual interest expense.
Item 4. CONTROLS AND PROCEDURES
Management’s Evaluation of Disclosure Controls and Procedures. Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2022. Disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of June 30, 2022, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.
Changes in internal control over financial reporting. There were no changes in our internal control over financial reporting that occurred during the three months ended June 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II—OTHER INFORMATION
Item 1. Legal Proceedings
See Note 14 to the Unaudited Condensed Consolidated Financial Statements included in this Report.
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Item 1A. Risk Factors
In addition to the other information set forth in this Report, you should carefully consider the factors discussed under Part I, Item 1A “Risk Factors” of our 2021 Annual Report on Form 10-K. The risks described herein and in our 2021 Annual Report on Form 10-K, as amended, are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.
We may not be able to consummate our merger with Sacred Wind on a timely basis or at all.
On July 26, 2022, we entered into a stock purchase agreement (the “Purchase Agreement”) with Sacred Wind Enterprises, Inc. (“Sacred Wind”) to purchase all of the issued and outstanding Sacred Wind stock (the “SWE Transaction”). The SWE Transaction remains subject to customary closing terms and conditions including (i) obtaining the necessary consents of third parties, including the Federal Communications Commission (“FCC”), (ii) obtaining the consent of the Rural Utility Service to the continuation of Sacred Wind’s current loan facilities, and (iii) the absence of certain legal impediments. There can be no guarantee that the regulatory authorities will grant such required approvals. In addition, the FCC may impose conditions on any approval, such as requiring the divestiture of certain markets and spectrum licenses. These conditions, if imposed and if sufficiently significant, may permit Sacred Wind not to consummate the transaction or may have other negative impacts on our business.
If we are able to successfully consummate the SWE Transaction, we may have difficulties integrating its operations and its business and our business, financial condition and results of operations could be adversely affected.
The SWE Transaction will occur as we are engaged in the transformation of our rural Southwest business from a primarily wholesale wireless business to a rural broadband and carrier service business model. We anticipate that the SWE Transaction will contribute to business transformation needed in our US Telecom segment by growing our fiber assets and increasing internal operational experience running those fiber assets. The complexities of the integration and expansion of Sacred Wind’s operations are not yet known, and our team will be executing on the integration alongside the transformation of our existing business. We have devoted and will continue to devote a significant amount of time and attention to integrating these operations with our existing operations. If we have difficulties with the integration or transition process, it could harm our reputation and have a material adverse effect on our business, financial condition or results of operations.
We are reliant on government funding to comply with the FCC’s “Replace and Remove” Program.
A number of our equipment suppliers and vendors are based outside the United States, with China serving as a significant non-US source for our telecommunications network equipment in the United States. The FCC, and other governmental restrictions on the procurement of equipment and services from certain Chinese vendors, will result in a costly network replacement build in our western United States operations that, if not offset by government support, could adversely affect our results of operations. We have been allocated more than $207 million to reimburse us for our demonstrated costs attributable to the FCC’s Replace and Remove Program for our Chinese vendor equipment and services, however, due to a universal reduction in funding to all applicants in the Replace and Remove Program by the FCC, this represents less than the total amount of funding that we initially applied for. Although Congress is currently considering increasing funding to the FCC for the Replace and Remove Program, there can be no assurances that the FCC will actually receive such additional funding, that it will allocate any such additional funds to us, or that any such funds will be adequate to completely remove, securely destroy, and replace all prohibited equipment from our network.
In addition, the FCC has mandated an aggressive timeline for the completion of the Replace and Remove Program, requiring that participants only receive funding in reimbursement for costs incurred in program-related activities, and that the initial reimbursement request be submitted no later than July 14, 2023. In addition, we must complete the project no later than one year after submitting our initial reimbursement request, in effect requiring that build activities be concluded no later than July 2024. If we are unable to complete the removal and replacement in that time frame, cannot secure advanced funding for the program activities on terms and conditions that are acceptable to us,
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or have underestimated the cost of replacement, it could adversely affect our ability to operate, maintain or expand our domestic network infrastructure.
Changes in interest rates and credit markets could impact our ability to service and expand our financing.
We require a significant amount of capital to expand our networks and grow our business that we fund partially from cash from operations and in part from borrowings under our credit facilities. Interest rates are highly sensitive to many factors which are beyond our control, including general economic conditions and policies of various governmental and regulatory agencies and, in particular, the U.S. Federal Reserve. Changes in monetary policy, including changes in interest rates, could increase our costs of borrowing.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Purchases of Equity Securities by the Issuer
On September 19, 2016, our Board of Directors authorized the repurchase of up to $50.0 million of our common stock from time to time on the open market or in privately negotiated transactions (the “2016 Repurchase Plan”). We have $19.5 million available to be repurchased under that plan as of June 30, 2022.
The following table reflects the repurchases by us of our common stock during the quarter ended June 30, 2022:
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| (d) | ||||||
Maximum | ||||||||||
Number (or | ||||||||||
(c) | Approximate | |||||||||
(b) | Total Number of | Dollar Value) of | ||||||||
(a) | Average | Shares Purchased | Shares that May | |||||||
Total Number | Price | as Part of Publicly | be Purchased | |||||||
of Shares | Paid per | Announced Plans | Under the Plans or | |||||||
Period | Purchased | Share | or Programs | Programs | ||||||
April 1, 2022 — April 30, 2022 |
| 831 | (1) | $ | 39.53 | $ | 19,451,514 | |||
May 1, 2022 — May 31, 2022 |
| — | — | — | 19,451,514 | |||||
June 1, 2022 — June 30, 2022 |
| — | — | — | 19,451,514 | |||||
| (1) | Represents shares purchased on April 30, 2022 from our executive officers and other employees who tendered these shares to us to satisfy their tax withholding obligations incurred in connection with the vesting of restricted stock units at such date. These shares were not purchased under the 2016 Repurchase Plan discussed above. The price paid per share was the closing price per share of our common stock on the Nasdaq Stock Market on the date those shares were purchased. |
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Item 5. Other Information
Replace and Remove Program
On July 15, 2022, the Company was notified that it was an approved participant in the Federal Communication Commission’s Secure and Trusted Communications Networks Reimbursement Program (the “Replace and Remove Program”), designed to reimburse providers of communications services for reasonable costs incurred in the required removal, replacement, and disposal of covered communications equipment or services, that have been deemed to pose a national security risk, from their networks. Pursuant to the Replace and Remove, the Company was allocated up to approximately $207 million in reimbursement amounts to cover documented and approved costs to remove and securely destroy all ZTE communications equipment and services in its U.S. networks and replace such equipment. The Replace and Remove Program requires that the Company complete its first request for reimbursement for services performed under the program no later than July 14, 2023 and that it complete the project no later than one year from submitting its initial reimbursement request. The Company is currently assessing the impact of this program on its financial statements and anticipates that it will be able to meet the deadlines and requirements of the program.
On August 4, 2022, we amended our FirstNet Agreement with ATT to extend the overall build schedule. For more information about our FirstNet Agreement with ATT, please refer to “FirstNet Agreement” under Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations.
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Item 6. Exhibits:
10.1 | ||||
10.2* | ||||
31.1* | ||||
31.2* | ||||
32.1** | ||||
32.2** | ||||
101.INS | Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | |||
101.SCH* | Inline XBRL Taxonomy Extension Schema Document | |||
101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |||
101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document | |||
101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document | |||
101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |||
104 | Cover Page Interactive Data file (formatted as Inline XBRL and embedded within Exhibit 101). | |||
* Filed herewith.
** The certifications furnished in Exhibit 32.1 and Exhibit 32.2 hereto are deemed to accompany this Report and will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, except to the extent that the Company specifically incorporates them by reference.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
ATN International, Inc. | |
Date: August 8, 2022 | /s/ Michael T. Prior |
Michael T. Prior | |
President and Chief Executive Officer | |
Date: August 8, 2022 | /s/ Justin D. Benincasa |
Justin D. Benincasa | |
Chief Financial Officer |
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